Lump Sum vs Dollar Cost Averaging Simulator
LS outperformed DCA in 74.29% of times (vs. 25.71% for DCA)
LS had higher max drawdown -48.59% (vs. -41.99% for DCA)
LS outperformed DCA in higher average return 9.33% (vs. 4.95% for DCA)
| LS wins | DCA wins | LS return | DCA return | LS drawdown | DCA drawdown | |
|---|---|---|---|---|---|---|
| LS vs 3 months DCA | 65.29% | 34.71% | 2.28% | 1.52% | -40.86% | -34.11% |
| LS vs 6 months DCA | 69.57% | 30.43% | 4.56% | 2.63% | -46.83% | -38.68% |
| LS vs 12 months DCA | 74.29% | 25.71% | 9.33% | 4.95% | -48.59% | -41.99% |
| LS vs 24 months DCA | 79.85% | 20.15% | 19.73% | 9.91% | -51.62% | -46.35% |
| LS vs 36 months DCA | 79.57% | 20.43% | 31.41% | 14.87% | -46.89% | -47.27% |
| LS wins | DCA wins | LS return | DCA return | LS drawdown | DCA drawdown | |
|---|---|---|---|---|---|---|
| LS in all-time-high | 78.00% | 22.00% | 11.70% | 6.51% | -42.04% | -33.57% |
| LS in < 5% from all-time high | 75.89% | 24.11% | 10.12% | 5.09% | -45.35% | -38.00% |
| LS in < 10% from all-time high | 79.59% | 20.41% | 8.79% | 3.61% | -47.84% | -41.99% |
| LS in < 20% from all-time high | 61.67% | 38.33% | 6.25% | 4.80% | -48.59% | 0.00% |
| LS in < 30% from all-time high | 69.59% | 30.41% | 3.93% | 2.38% | -32.79% | -27.93% |
| LS in > 30% from all-time high | 86.59% | 13.41% | 17.98% | 8.79% | 0.00% | 0.00% |
| LS wins | DCA wins | LS return | DCA return | LS drawdown | DCA drawdown | |
|---|---|---|---|---|---|---|
| S&P 500 | 74.29% | 25.71% | 9.33% | 4.95% | -48.59% | -41.99% |
| Nasdaq | 66.06% | 33.94% | 24.58% | 12.58% | -63.35% | -55.96% |
| Total Stock Markets | 65.42% | 34.58% | 8.23% | 4.77% | -29.92% | -29.04% |
| REITs | 60.64% | 39.36% | 4.69% | 2.49% | -64.09% | -59.22% |
| Gold | 63.57% | 36.43% | 9.49% | 5.05% | -29.28% | -25.94% |
| Bitcoin | 62.83% | 37.17% | 159.66% | 70.86% | -83.62% | -65.32% |
What is Lump Sum investing?
In terms of investing, a "lump sum" refers to a single, large sum of money that is invested all at once, as opposed to smaller amounts invested over time through regular contributions.
For example, if you inherit a large sum of money or receive a bonus from your employer, you may decide to invest that money as a lump sum rather than spreading it out over a period of time.
Investing a lump sum can have advantages and disadvantages. On one hand, if you invest at the right time, you may be able to take advantage of market conditions and potentially earn higher returns. On the other hand, if the market experiences a downturn after you invest, you could experience significant losses.
It's important to carefully consider your investment goals and risk tolerance before deciding whether to invest a lump sum or make regular contributions over time. It's also a good idea to consult with a financial advisor who can help you make the best decision for your individual circumstances.
What is Dollar-Cost-Averaging investing?
"Dollar-cost averaging" (DCA) is an investment strategy where an investor invests a fixed amount of money at regular intervals, regardless of the market price of the investment.
For example, if an investor decides to invest $500 every month into a mutual fund, regardless of whether the fund's price is high or low, they are using the dollar-cost averaging strategy.
The idea behind DCA is to reduce the impact of market volatility on investment returns. By investing a fixed amount of money at regular intervals, an investor will buy more shares when prices are low and fewer shares when prices are high. Over time, this can help to smooth out fluctuations in the market and potentially lead to better overall returns.
DCA is often recommended for those who are new to investing or who may be uncomfortable with the idea of investing a lump sum all at once. However, it's important to note that DCA is not a guaranteed way to make money and may not be the best strategy for all investors or all investment types. It's important to carefully consider your individual circumstances and investment goals before deciding on a strategy.
What is better? Lump sum or Dollar-Cost-Averaging (DCA) investing?
There is no one-size-fits-all answer to the question of which approach is better. The choice between lump sum investing and DCA largely depends on individual circumstances and investment goals.
If an investor has a large sum of money available for investing and is comfortable with the potential risks associated with investing all at once, lump sum investing may be the better approach. On the other hand, if an investor is more risk-averse or does not have a large sum of money available for investing, DCA may be the better approach.
Ultimately, the most important thing is to carefully consider your individual circumstances and investment goals before deciding on an investment strategy. It is always advisable to consult with a financial advisor who can help guide you in making the best decision for your financial future.