Asked on 21 Jul 2020
It is best to invest consistently based on your financial goals rather than let cash accumulate and put in money into the market lump sum.
Because it is innately difficult to time the market, and the market over the long run gives higher returns, it is safer to stick to your investment goals and invest consistently.
Some of the exception to this rule includes being unable to work, having a sudden huge short term monetary commitment that you need to look out for. Else it is better to invest consistently to get a long term market returns.
Hope this helps!
Theoratically, it is better to put a lump sum when the prices are low so you earn any interest gained on your entire capital.
Practically, when do you put your money in? It's impossible to know when the prices are lowest before they go up unless you're doing insider trading.
Thus the more conservative option is usually dollar cost averaging cause the market tends to trend upwards so you're going to earn in the long term (eg 10 years later)
22 Jul 2020
I'm no expert myself but the best advice I've been given so far is to dollar cost average: putting in consistent sums of money into the market every month The benefits are
1) you reduce your risk of entering the market at the wrong time (I.e. timing the market). while you may reap a lot if you enter in a slump (which we may be in) but u really don't know what the future holds.
so the second reason is DCA helps to make sure:
2) you don't invest based on emotions.
we tend to put money in when we "feel" the market is growing, and then pains sell when it's dropping. Dollar cost averaging will force you to be disciplined to hold on no matter what. The markets eventually rise, we have to be patient.
while it's no guarantee for higher earnings, but it Guards you from "betting" the right time to enter.
hope that helps?
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