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Anonymous

04 Sep 2020

General Investing

Have 15k to invest..IDWA or SWRD? Lump sum or DCA?

Thinking if I should invest IDWA and SWRD. Or buy both? Seeing that the spread for SWRD is more, but expense rate lower. Which will you recommend and why? Would you do lump sum 15k or DCA?

Discussion (11)

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I'd pick SWRD even though the spread is larger. Based on some calculations (Apr 2020 so may be worth looking again), the spread of SWRD was about 0.07% wider for buying. This totals to 0.14% if you consider that eventually there will be a need to sell.

On the other hand, IWDA has a higher expense ratio by 0.08% p.a. This means that as long as you have a holding period of longer than 2 years, you'll be better off with SWRD as compared to IWDA.

Of course, these assume the spread and expense ratios remain constant for the long term, but that's a different issue altogether. For now my vote would be on SWRD.

Historically, lump sum also outperforms DCA on average if you're sitting on idle cash balances already. Logic vs psychology is a very different matter altogether though, so put lump sum if you can take it, otherwise no more than two pots (and don't wait too long to invest the second).

I would consider the brokerage fees when making the decision. Are you using those with low fees/zero fees, if so can consider smaller amount.

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Put it lump sum into SWRD, or at max 2 x DCA. It is not so large a sum.

Do not buy both.

SWRD is l...

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