Dollar Cost Averaging Large Sums
episode
DIY Money | Personal Finance, Budgeting, Debt, Savings, Investing
16 min
5 speakers
3 chapters
transcribed 1 month ago
Transcript
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Hey, this is Allie, and thanks for listening to the show. Give us a five-star review where you listen and share this episode with someone who might need to hear it. Now, enjoy the show. welcome back ladies and gentlemen you're listening to another edition of diy money diy money we're shaking logan not much is shaking i mean we got we're just keep rolling along we got derby coming up you know booyah fun times in kentucky but it is fun times in kentucky uh by the time this show airs will be after the derby yep uh derby fast what is it fastest or greatest two minutes in sports it can't be the best i think it's the greatest two minutes in Anyways, amazing, amazing race held at Churchill Downs, not Keeneland, which is right around the corner from us in Lexington.
So good times, yeah. All right, odds and ends for those listeners. First of all, welcome if you're a new listener. We really appreciate it. If somebody shared it with you, share it with someone else. Hopefully you're finding some value in this. I am getting – I heard from someone – who learned that I was going to be abroad this summer for several weeks, reached out, and I found out that he, this individual, helps with teaching. I might butcher this, and I apologize, but maybe you can add color. You read the email too. Teaching finance to Marines who are abroad. Yep. And uses some of our content. So cool. I was like, awesome. I was so jazzed to hear that.
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I look forward to my wife was like I said, hey, I'm going to meet meet somebody, a listener from the show, you know, when I'm in Italy. And she's like, wait, you're going to do what? And I'm like, yeah, I'm going to, you know, meet a guy that listens to the show. And she's thinking like a Howard style, like you're going to get killed. Like this is a terrible idea. And so he's like U.S. Marine Corps corporal or something like that. And he said, you know, I'm like, I think I'm going to be just fine. I'll probably be safer with him than any other. person on the planet so uh that'll be great uh so thank you for the new listeners share it with a friend we operate on questions most of the time we do series periodically that last couple were a hit and we'll do we'll certainly do more but send us questions audio file to podcast at diy money.org that's podcast at diy money.org if we use it on the show we'll send you a 25 amazon gift card let's get right into it we got a question today from kj what do you got diy
Hi, DIY Money Team. It's KJ from Chicago. I think I understand dollar cost averaging and understand the long-term benefits of doing such. Should I dollar cost average a large sum of money like an employer's bonus or inheritance? For me personally, it would require a lot more discipline to sit on, let's say, $24,000 in cash and deploy $2,000 monthly versus dumping the entire $24,000 in the market. How do you advise clients in this situation? Thanks a lot.
Okay, KJ, I'm going to approach this just as you asked. How do we advise clients in this situation? And we do advise dollar-cost averaging. We are a proponent of dollar-cost averaging. Now, it's interesting that if you look at studies or look for studies, there is systematically or scientifically, at least historically, no benefit to dollar-cost averaging whatsoever. In fact, it is better to get that money online working immediately rather than doing it over time. However, and it's an option. You can certainly do that. I don't do that, even though that's what the scientific numbers say and the history tells us. I still don't do it. And I don't game it either. But what I do do is... I take that money. And the first thing I would do is remove it from your checking or savings account.
That's number one. And that's probably going to help alleviate some of this anxiety that you're thinking. I'm going to assume, and I apologize if this is a poor assumption, that in your mind, you're like, I got $24,000 sitting in my checking account. And what they're saying is take $2,000, put it in my Vanguard and invest. And then a month later, put $2,000 in my Vanguard and invest.
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