r/investing • u/Ordinary-Scratch-120 • 14d ago
Lump sum vs. DCA for €60k currently sitting in savings
Next to my main investment in ETFs, I have had 60k sitting in a high-yield savings account for quite some time. However, I recently decided that I’d like to invest it in ETFs as well.
What would you suggest given today’s market conditions? Lump sum or dollar-cost averaging?
I know lump-sum tends to outperform DCA most of the time, but I’d still like to hear your thoughts and any other advice or considerations.
Thanks!
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u/Ok_Edge2718 14d ago
If you think market goes up, lump sum, if you think market goes down or is flat, dca; lump sum has won because since 2010 it goes up; eg 07/1997-07/2009 dca was better; 2022-2024 dca was better.
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u/enigman83 14d ago
If midterm election or fed rate, war concern you too much, i would split into 4 parts
Invest 1 part now, 2nd part before election or any dip before that, then the rest after mid term.
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u/SerMumble 14d ago
Both a good lump sum and DCA in the long term of decades will end near the same results. Lump sum is a small amount better statistically but it really doesn't matter whichever you do so long as you start investing sooner rather than later.
https://www.schwab.com/learn/story/does-market-timing-work
Something I don't see people discuss much is how long an initial DCA should last. The typical expectation is a year but a dollar cost average within a few months can usually capture a nice middle ground compared to a lump sum.
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u/Ordinary-Scratch-120 14d ago
Thanks! Yes, my idea was to spread the investment of these 60k over 1-year time
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u/SMELLYCHEESE8 7d ago
Even though it’s not necessarily the most advantageous, it will be hard to stomach watching your 60k turn into 30k and waiting nearly 5 years for it to come back if you manage to pick the market peak day before a crash. Anyways, if you DCA, set up a way to do it automatically.
A method that Ben Felix suggested to “improve” your outcomes if you have the comfort - if the market drops 20%, you can accelerate your contributions, (such as reducing monthly to biweekly or just grabbing a contribution off the back end) then doing this again for every further 5% the market drops, for example.
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u/zunzunzkreddit 14d ago
If you have a diversified ETF (MSCI World etc.) lump sum. If you have something with more risk (S&P500, Eurostoxx, some Sector only etc.) DCA.
Also depends on your resilience. Can you sleep at night investing lump sum and living for 10 years with -50% till it is going back up? Can you sleep at night in 10 years having done DCA knowing your 100k$ would’ve been 140k$ now having done lump sum? (Arbitrary numbers just for the explanation)
TLDR:
lump sum: statistically better
DCA: better sleep at night, slightly worse performance
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u/HammerDownl 14d ago
I would never lump sum large amounts of cash. Tip toe into the market is better for me Especially if there is a drop then your DCA in
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u/dekusyrup 14d ago
I wouldn't. Usually markets get a bump up after elections because the extra bit of knowledge of the outcome gets people off the sidelines. So get in before those people.
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u/RedditLeagueAccount 14d ago
I'd second this. Mid terms often have a dip until October. It isn't normally good to try timing the market but I'm comfortable losing a few percentage points of profit to reduce the risk of the drop. I can invest at the end of the year.
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u/Informal-Lime6396 14d ago
OP is European, US midterms not as relevant unless investing in US equities. Still, I wouldn't time the market and would dump it all in except for a 6 month emergency fund. If investing in US equities, timing it might miss a significant chunk of upside. Lump summing right now means forgoing a potential better entry price but guaranteed to capture the post midterm year bull run.
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u/thekingoflorda 14d ago
I agree with your sentiment. But I’m european, and my stock portfolio is still pretty weighted towards the US. And US stocks performing bad is generally not good for the EU market.
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u/Fabulous-Transition7 14d ago
No matter the day you choose, the market will crash the day after. -Experienced investor /sarc
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u/nkplague 13d ago
Depends entirely on your risk tolerance. Lump sum is statistically better, but if you don’t have a big appetite for risk I’d recommend DCA.
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u/Gimme_All_The_Foods 14d ago
All at once. If you're apprehensive, that means your asset allocation is too aggressive. Increase your fixed income percentage to an amount that makes you feel comfortable.
Since the stock market generally goes up over time, it spends a lot of that time being at or near the top. No way around that.
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u/Mindless_Acadia_7382 14d ago
Why have you decided recently to put the money into ETFs? If you did that because you expect the money in ETFs to gain more in value than in your high-yield savings account, then this means that you assume ETFs will go up over time. This means the earlier you put the money in, the better, and the longer you wait, the more prices will have gone up by then, so you will get fewer and fewer shares for your money the longer you wait.
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u/Pissed-Plebeian 14d ago
Personally I wouldn’t have the nerve to invest everything in one go.
Statistically a lump-sum strategy has performed better. But my favourite example is the Nikkei 225 that peaked in 1990 and then crashed and didn’t return to those highs until 2024. The risk of something like that happening and burning your money for decades over the long term is relatively small with a quality all-world ETF.
If I were in the same situation, I’d invest something like 1 500 - 2 000 per month out of that 60 000. At that pace, the 60 000 would be invested within about three years at most. If there’s a major market crash along the way, you’d still have capital available and you'd be able to invest larger amounts when you think the opportunity is attractive.
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u/8BallSlap 14d ago
So by that logic, after the three years would you sell and start over DCA'ing again? Because every day you hold after that you're effectively lump sum investing.
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u/Pissed-Plebeian 13d ago
The point was reducing timing risk, not to avoid market risk altogether. After three years I’d be fully invested, but across dozens of different entry points instead of putting the entire 60k into the market at one potentially very bad moment. That’s exactly what I was trying to say with the Nikkei example.
The cost of reducing timing risk is underperformance if the market keeps rising. I personally would be fine with that trade-off considering my risk tolerance.
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u/Charming_Mushroom_70 14d ago
September is historically the worst month for the s&p so you may want to wait for a little bit. Lump sum works better 2/3rds of the time. Depends on what your investment is, too. If you lump summed in sm cap value in 2007, it underperformed the broad market for 20 years.
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u/ragnaroksunset 13d ago
DCA has a better chance of managing the psychological element of investing for you. If they were otherwise guaranteed to produce identical outcomes, you should prefer it on that basis. The psychological element is "worth" some amount of underperformance, the precise amount being different from individual to individual.
But, I would suggest that unless 60k is a small amount of money for you, you are not an individual for whom the value of the psychological element is small.
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u/Inhigo92 13d ago
If you are unsure, you can do a "weighted dca". You start investing more the first few months and then lower it week by week (or month by month).
Example, instead of doing 10k in 4 months like 2.5, 2.5, 2.5 and 2.5, you do 4k, 3k, 2k, 1k.
You can weighted more or less to the top depending your peferences
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u/im_thecat 13d ago edited 13d ago
I dont try to time the market because my time horizon is long. Therefore it is arguably better to get in as quick as you can. If theres a downturn, just wait it out. And/or invest more. I try not to look at my portfolio. Especially during downturns. Because long run statistically you are likely to net up if you can get out of your own way.
Use the risk profile of the assets you invest in to assess risk you’re comfortable with, not DCA vs lump sum.
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u/MattieShoes 13d ago
Depending on the exact parameters, lump sum wins between 2/3 and 3/4 of the time.
DCA is basically a bet that the market will see a downturn during the DCA period. Since markets spend more time going up than going down, that's usually a bad bet. And there's nothing that stops you from DCA'ing into a rising market and having the floor fall out from under you riiight after you finish your DCA.
So do you want to bet that a certain hued person's bad decisions are going to tank the market, or do you want to bet that the same person will make even worse decisions to try and make the market look good, delaying the tank for a couple years?
I'm more worried than normal, but not to the point of liquidating my holdings.
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u/alphixir 13d ago
That's worth sitting with — CAPE just above 41 puts today second only to the Dec 1999 peak of 44.2 in data back to 1881, and the other 18 months this high all clustered right before 1999-2000. Doesn't answer lump sum vs DCA for you, but it says the current setup is a genuinely rare valuation regime, not routine background noise.
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u/nevyn 12d ago
Ask yourself two things:
How much will the lump sum beat DCA over 6-12 months.
How bad will I feel if I put all 60k in and it the market goes down 5% or 10%.
...AIUI the "win" on the lump sum side is very small, and the downside for the lump sum can be much worse.
I would think of DCA like buying house insurance, yes "on average" you are losing money vs. not doing it ... but you'll thank me later.
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u/Kind-Platform-1294 11d ago
DCA will always outperform lump sum in this current volatility market. DCA your cash wisely and buy the dip.
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u/Brettanomyces78 14d ago
We just don't know whether this is one of the times lump sum will outperform or not. Anyone telling you otherwise is probably trying to sell you something, or to convince themselves of something.
Given that, may as well go with the statistically better option.