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Dollar Cost Averaging v. Lump Sum Investing - Part II
By JLP | July 27, 2006
This is a follow-up to Dollar Cost Averaging - Does it Work?
I did a little research and put together this spreadsheet (download). I wanted to compare dollar-cost averaging with lump sum investing. For this example I assumed:
$100 invested in Vanguard’s S&P 500 Index Fund on the first trading day of each month for 199 months. To get the lump sum amount, I simply multiplied 199 by $100, which tells us how much was invested over the time period.
Dividends are reinvested at the closing price on the day that the dividend is paid.
The ending account value uses the July 3rd closing price.
Here’s what the chart looks like:
Obviously from this example, it would have been better to have invested a lump sum rather than dollar-cost average. But, like I said before, that’s not possible for 99.9% of the investors out there. So, my advice is to not worry about it and just keep socking money away for your future.
Topics: Investing, Mutual Funds |