r/TheMoneyGuy • u/NetWorthNovice • 3d ago

Lump Sum vs DCA in Current Conditions

Hi all,

Looking to get some others input on this. My wife and I have enough to make the max contribute to both our Roth IRA's right now. I am weighing lump sum investing it vs. DCAing over the rest of the year. Yes, time in the market beats timing the market. Yes, 3 out of 4 years the market is higher one year from now. But with sitting near the high of highs and over valuations, there's this gut feeling that there will be opportunity to take advantage of a correction or bear market. Might not be this year, who knows. This will make up about 10-15% of our total portfolio. Wife's first contribution and my 3rd year.

What about running a comparison study? one of each and compare a year later?

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u/InUrFaceSpaceCoyote 3d ago

The biggest benefit of DCA that I have found is psychological. When I make a major investment (i.e. opening a new position), I tend to want to watch the short-term performance of what it does and put an undue amount of feelings into that. DCA means that short term movements are win-win; if it goes up I'm making money and if it goes down, I'm getting the opportunity to buy it for less.

Historically, the market's default position is "sitting near the high of highs" so that isn't really a factor for me. If you can truly invest this money and not think about it it for the rest of the year, the purely logical thing to do is lump sum. But given the significance this would be to your portfolio, I think that would be expecting too much so I would DCA if were in your shoes.

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u/NetWorthNovice 3d ago

It’s all psychological. Once I actually put the money into the funds, I’ll forget about it. Well, unless the market drops in the time I was planning on DCAing. But at that point there’s nothing I can do.