DCA vs Lump Sum for S&P500 - which should I go for amidst this COVID-19 pandemic? - Seedly
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Kristal.AI

Anonymous

Asked 6d ago

DCA vs Lump Sum for S&P500 - which should I go for amidst this COVID-19 pandemic?

I am thinking of putting my first $10k into Kristal.AI's S&P500, since there are no fees for the first $50k of investments. There are two indexes that I am looking at:

  • CSPX (minimum investment of $4.3k)

  • IVV (min. $357)

If I do CSPX (Irish domiciled, 15% tax on dividends), I can only DCA two times, while I will be able to DCA over a longer time horizon for IVV - but I would be subject to the 30% tax on dividends.

Which should I be going for amidst this COVID19 pandemic?

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CJ
Cynthia Jasmin
Top Contributor

Top Contributor (Mar)

Level 6. Master
Answered 5d ago

Hi there,

DCA/ SIP (Systematic Investment Plan) is the preferred strategy when there is heightened volatility in the markets.

Hope this helps,

Cynthia

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Lump sum wins 90% of the time. DCA is a strategy used for psychological and emotional control, not a strategy for better returns.

If you're able to stay logical and insane, lump sum is statiscally a better strategy. DCA works for most people because it is easier to stick too and not panic.

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Tor Teck Chiat
Tor Teck Chiat

1d ago

I do agree that Lump sum generates more return. I have been doing that. But at the same time, in a volatile situation like Covid19, I have adopted the DCA method to reduce the strain on my emotion as I see the market gyrate. I would use both of them accordingly to situation. Bull run for a lump sum and DCA in a volatile market. Hope that helps.
S
Suraiinsos
Level 2. Rookie
Answered 6d ago

I think at where the market is right now! DCA is the best option since it will take a while for the market to recover, however if you feel that the market is going to pick up right away then lump sum investing might be advantageous for you.

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You need to determine your risk appetite and investment horizon, as well as the asset that you are intending to invest into. Here is a simulation:

More Details:

Lump Sum vs Dollar Cost Averaging

Generally, both methods work so long as you are invested in the right asset. If you are worried about short term volatility, then use dollar cost averaging to reduce some of this risk.

I share quality content on estate planning and financial planning here.

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