Investing a lump sum
Investing a lump sum can be a daunting prospect. This article is intended to discuss the options to consider when investing a lump sum, and to present practical options for making the investment.
Topics to discuss:
- Statistically, lump sum performs better than dollar cost averaging. Link to sources - there is a Vanguard report available.
- Which one performs better depends on timing, which is difficult to judge in advance. Like all investing, being statistically likely does not mean you will fall within the bell curve
- Dollar cost averaging is not much worse than lump sum, and it's better than not investing at all.
- Making an emotional choice to prefer DCA is a reasonable strategic choice to ease in to the market if you are feeling paralysed but also do not want to lose out on potential market gains.
- For the investor in Japan, exchange rate considerations (a hot topic at the time of writing due to a sudden devaluation in the yen).