“I can calculate the motions of heavenly bodies, but not the madness of people.”

Sir Isaac Newton

In This Edition

• From the Mouth of a Truth-Teller: Dollar-Cost Averaging
• Truth Teller of the Week: Larry Swedroe
• This Week’s Podcast: Evidence-Based Investing
• From a Listener

From the Mouth of a Truth-Teller

Dollar-Cost Averaging: Does It Produce Better Results?

Dollar-cost averaging is one of the questions Larry Swedroe is asked about most. After the bruising bear markets of 2000–02 and 2008, many investors grew too nervous to put a lump sum to work all at once — but the academic evidence, Larry notes, points the other way.

He points to a Gerstein Fisher study that back-tested lump-sum investing against dollar-cost averaging from 1926 to 2010. Because the S&P 500 rose in more than 70% of those years, investing the money all at once won in 552 of 781 rolling 20-year periods — better than 70% of the time — and when it won, it won by more. Spreading the money out only pays off when prices are falling, which is the less likely outcome.

So why is dollar-cost averaging so popular? It is a risk-averse, emotional strategy, Larry explains — a way to ease the regret of investing a large sum right before a downturn. His bottom line: there is no logical reason to dollar-cost average, but if you are so anxious that the alternative is not investing at all, it becomes “the lesser of evils.”

My own take: imagine you spend 24 months slowly putting your money to work, hoping to protect yourself against a painful decline. The problem of the big bear market still exists — it is entirely possible the decline doesn’t arrive until you are fully invested. When I was an advisor, I found many investors were most comfortable with a blend: part lump sum, part dollar-cost averaging.

Read “Investing With the Market at All-Time Highs” →

Truth Teller of the Week

Larry Swedroe

You just heard from Larry above — and he has earned that trust. Few people have done more to bring evidence-based investing to everyday people. As a longtime head of research and the author of nearly twenty books, Larry has spent decades turning dense academic research into plain, practical advice you can actually use. When you want the data behind a decision, he is one of the first voices I’d point you to.

Meet all of our Truth Tellers →

This Week’s Podcast

Evidence-Based Investing, Index Funds & Staying the Course

I recently sat down with Steve Chen on his Boldin Your Money podcast for a wide-ranging conversation about evidence-based investing — and why it matters more than ever in a world of speculation, hype, and constant financial noise. We covered my early days as a stockbroker in the 1960s, the psychology that trips investors up in downturns, how low-cost index funds transformed personal finance, factor investing and small-cap value, and why younger investors are being pulled toward gambling-like behavior through apps, crypto, and prediction markets. Whether you’re just starting out or planning for retirement, I think you’ll find it time well spent.

▶ Listen to the Episode

Watch the Episode

Correction: at one point in the conversation, Paul says “equities” when he meant to say “bonds.”

From a Listener

“I listen to and read your stuff religiously. Much admiration for how you look out for the little guy — and how you draw retirement-age joy out of education.”

From Paul Merriman

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Lump sum or dollar-cost average? Larry Swedroe weighs in