How to Invest New Cash: Dollar Cost Averaging vs. Lump Sum Investing

Ben Felix, a Portfolio Manager at PWL Capital, discusses the optimal approach to investing a lump sum of cash. He compares lump-sum investing with dollar-cost averaging, citing research showing that lump-sum investing generally outperforms dollar-cost averaging over the long term, despite the latter's perceived psychological benefits. He addresses common investor concerns, such as market timing and high valuations, demonstrating that even in worst-case scenarios or during periods of high market valuations, lump-sum investing tends to be more advantageous. Finally, he cautions that if an investor feels compelled to use dollar-cost averaging due to fear, it might indicate a need to adjust their asset allocation to a less risky portfolio.