Dollar-Cost Averaging Versus Lump-Sum Investing: Which Builds More Wealth?
In a test of rolling 20-year periods since 1926, lump-sum investing outperformed dollar-cost averaging 73% of the time.
Explains the mechanics of two strategies for getting a large amount of money into the market, along with their risks and behavioral appeal
Shows historical evidence of lump-sum investing outperforming most periods
Discusses when dollar-cost averaging may be preferred and introduces momentum-based variation
In light of the recent equity market rise, the potential for increased volatility and the several equity market crashes that have occurred over the last 30 years, a growing number of investors have become wary of putting large amounts of cash to work in the market at one time. At Quent Capital, we recently took an updated look at lump-sum investing compared to dollar-cost averaging (DCA).
