Dollar Cost Averaging vs. Lump Sum Investing: Which Strategy Is Best?

Hello everyone,

Investing is a crucial part of building wealth, and the strategy you choose can really affect your returns. Today, let’s break down two popular approaches: Dollar Cost Averaging (DCA) and Lump Sum Investing (LS).

Dollar Cost Averaging (DCA) means spreading out your investments over time. For example, instead of putting $12,000 in all at once, you’d invest $1,000 each month for a year. This can help reduce the risk of market ups and downs, making it a great option for new investors who might be nervous about fluctuations.

Lump Sum Investing (LS) is about putting all your available money into the market at once. Research shows that this method often leads to higher returns because the market generally trends upwards over time. By investing everything right away, you can take full advantage of long-term growth.

Which strategy is better for you? If you’re cautious and want to avoid market volatility, DCA might be your best bet. But if you’re comfortable with taking on a bit more risk for potentially higher returns, LS could be more beneficial.

Personally, I do both. I lump sum invest into companies with good buying opportunities - AKA - below the intrinsic value. However, I also DCA into ETF’s such as VOO 0.00%↑ and SCHD 0.00%↑ every single week.

Utilizing both strategies has opened up the potential for massive growth to come my way in the coming years.

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