Lump-sum investing beats tactical cash drag
The guest argued that immediately deploying new capital into equity index funds on the day it is received is preferable to dollar-cost averaging or waiting for market pullbacks.
The argument
The guest stated that he immediately invests his book royalty checks into index funds regardless of whether the market is at an all-time high. He argued that keeping the process simple and brainless prevents behavioral errors and avoids the drag of holding cash.
The thesis, stress-tested
✓ What validates it
- ✓Academic studies showing lump-sum investing historically outperforms dollar-cost averaging the majority of the time
▸ Risks discussed
- ▸Deploying capital immediately before a sharp market correction or bear market
Hear it yourself
"So if you had a 100% of your money into index funds, what percentage is in which? The vast majority is a Vanguard total stock market index, VTI. Not all of it, but the vast, vast majority is that it is as broad as you can get."
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