Really appreciate this close look at lump sum vs dollar cost averaging. an interesting question. if you have lump sums, that is. no given for most retail investors. i also wonder if some middle way is best. averaging down when the initial investment falls and then leaving it be when it's rising. in any case, thanks.
We’ve had a lot of back-and-forth at DualEdge about whether this decision really matters much for retail investors. I do think there are some rare cases where choosing between DCA (dollar-cost averaging) and LSI (lump-sum investing) makes a difference, but most of the time, retail investors just end up going with DCA by default.
The strategy you mention — buying on the dips and holding steady when prices rise — can definitely work. The catch, though, is that you risk not being fully invested when the market picks back up, which means you’re sitting on cash that’s earning little or nothing.
At the end of the day, every strategy has its ups and downs, and I think it really comes down to what feels right for each investor.
Really appreciate this close look at lump sum vs dollar cost averaging. an interesting question. if you have lump sums, that is. no given for most retail investors. i also wonder if some middle way is best. averaging down when the initial investment falls and then leaving it be when it's rising. in any case, thanks.
Thanks, Joel, for your thoughts!
We’ve had a lot of back-and-forth at DualEdge about whether this decision really matters much for retail investors. I do think there are some rare cases where choosing between DCA (dollar-cost averaging) and LSI (lump-sum investing) makes a difference, but most of the time, retail investors just end up going with DCA by default.
The strategy you mention — buying on the dips and holding steady when prices rise — can definitely work. The catch, though, is that you risk not being fully invested when the market picks back up, which means you’re sitting on cash that’s earning little or nothing.
At the end of the day, every strategy has its ups and downs, and I think it really comes down to what feels right for each investor.