26 Mar 2020
Has Endowus ever perform any study, especially over the previous bear markets/crashes/recessions? Which strategy performs better over time and what are the fees' net amounts? Should I pick dollar cost average or lump sum investment?
Last week webinar the speaker spoke of "the worst investor" who only invested 100k at the peak, he would still have done well over a lifetime. How about if compared to DCA?
I am thinking maybe let's start with the common 40-60 or 60-40 portfolios.
Hi there! There is online literature which will be able to articulate the pros and cons of lump sum vs DCA investing.
Research from Vanguard shows that a lump sum investment outperforms DCA most of the time. The following diagram was based on the performance of a 60% stock/40% bond portfolio over a 12-month rolling period, and DCA interval was assumed to be monthly. Three developed markets were examined: US (1926–2015), UK (1976–2015), and Australia (1984–2015). This means that previous market crashes like in 1929, 1987, 2001, and 2008 have been factored into the analysis of returns in the US market.
Furthermore, this trend exists regardless of the asset allocation that you have (100% equity, 100% bonds, or 50/50).
The conclusion is that lump sum investments are usually better, especially if you have the money on hand. However, if it does make you feel better, a DCA would be a better choice in these periods of volatility.
If you are interested, the Vanguard report can be found here:
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