Author Topic: rolling vs lump sum investment  (Read 2244 times)

cv

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rolling vs lump sum investment
« on: July 01, 2013, 12:59:55 PM »
I was wondering if experienced folks here recommend rolling (monthly fixed amount) versus lump sum (say every 4-6 month) investment into vanguard accounts. thanks!

lauren_knows

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Re: rolling vs lump sum investment
« Reply #1 on: July 01, 2013, 01:03:51 PM »
I'm of the opinion that I can't time the market, nor do I want to even stress about timing the market.  I invest every month, at the end of the month, regardless of what is going on in the market.


Marmot

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Re: rolling vs lump sum investment
« Reply #2 on: July 01, 2013, 01:17:42 PM »
Hard to say. Do you think you have the discipline to manually put in the same amount that you would have invested via direct deposit, and do you want to put in that effort? I do manual as I like having the added control.

Term for monthly fixed amount is "dollar cost averaging": http://www.investopedia.com/terms/d/dollarcostaveraging.asp

fiveoclockshadow

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Re: rolling vs lump sum investment
« Reply #3 on: July 01, 2013, 01:45:33 PM »
Statistically, if there are no transaction costs, the best option is to invest your money as early as possible.  That means if you have a lump sum laying around invest it all now.  If you have continuous income invest that income continuously rather than saving it up as a lump sum to invest later.

Most of the "dollar cost averaging" examples that attempt to show spreading a lump sum across time as advantageous only achieve that result when the market follows a specific pattern (i.e. a V, investment losses followed by gains).

Now, if there are transaction costs then lumping may be advantageous as it will lower costs over all.  However, most good funds allow you to direct deposit over time with no transaction costs.

The market is a random variable with an increasing mean.  Getting in early as possible nets the best returns on average.

In your case, it sounds like you are talking about savings from income going into a vanguard account.  In that case, you are likely to be able to setup your monthly contributions to have no transaction costs.  So if that is the case then do it monthly.