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Anonymous
If i have 5k to invest via roboadvisor...Should i invest it lump sum and DCA a portion of my subsequent salary per month. Or should i spread out the 5k?
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thefrugalstudent
28 Feb 2021
Founder at thefrugalstudent.com
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Hi Anon,
I think it really depends on how comfortable you are with investing.
If you will feel bad about investing a lump sum only to have the price drop over the next few weeks/months, then perhaps you should spread it out to avoid this feeling.
If you know you're in it for the long run and won't be bothered by these short term price fluctuations, then invest it in a lump sum.
Either way, there's a scenario where you made the better choice or the worse choice. But there's no way to know which scenario will occur - so do whichever makes you feel less bad, based on the worst case scenario.
Personally, I would invest it as a lump sum. But if it's your first time investing, you might want to invest just a portion of the $5k first and see how you react to market fluctuations and how comfortable you are. That's how I did it when I first started, looking back I'd say lump sum would've been a better option. But hindsight is always 20/20, so whichever you're more comfortable with is the better option.
Hope this helps!
Regards,
thefrugalstudent