DCA vs. lump-sum question

[ragamoffyn]

Hi. I've gotten about $10000 in unexpected money that, for various reasons, I plan to invest in maybe 3 ETFs (e.g., energy, health care, info tech, etc.). I'm not sure whether I should invest it as a lump sum or via some dollar-cost averaging strategy, though.

I have looked through the forums here, and also googled the topic, but I haven't been able to find a clear answer. Would any of you be able to offer some advice, perhaps?

Thanks in advance for any help.

[disneysteve]

There is no "right" answer to the question. If you are investing consistently over an extended period of time, DCA tends to win. If, however, you are making a one-time investment of a relatively small amount, and I think 10K spread over 3 different funds would qualify, and plan to hold the investments for 5+ years, I think it won't really matter much.

[supercar]

10,000 over 3 etfs is pretty small. Just 3333 for each..... You have to do one time.
Look at the 3Xs when the market is down.

Energy : ERX
Health: RXD
Tech: TYH
Small Cap: TNA
Large Cap: BGU

etc.

[ez1]

Because you're looking at only around $3K per investment, your transaction cost (trading fee - let's assume around $10 to get in and $10 to get out, that's $20) is about 0.7% of the invested amount already. If you do DCA, you'll be increasing that.

You're probably better off just picking a day and investing the money. You might want to watch a basic indicator like RSI (relative strength index) to avoid investing when it's clearly "overbought" but otherwise just go for it.

[disneysteve]

Because you're looking at only around $3K per investment, your transaction cost (trading fee - let's assume around $10 to get in and $10 to get out, that's $20) is about 0.7% of the invested amount already. If you do DCA, you'll be increasing that.

FYI, there are low cost and no cost ways to invest in ETFs. I know Schwab and others often commission-free ETF trading so transactions costs need not be a factor in the decision. Still, with such a small amount of money involved, I don't think there would be any measurable benefit from DCA in this case.

[jpg7n16]

I know Schwab and others often commission-free ETF trading so transactions costs need not be a factor in the decision.

iShares ETFs by Category at Fidelity – Fidelity Investments

https://personal.vanguard.com/us/funds/etf

Schwab ETFs: Charles Schwab: ETFs
Exchange Traded Funds (ETF) & ETF Trading

Still, with such a small amount of money involved, I don't think there would be any measurable benefit from DCA in this case.

Agreed.

[ragamoffyn]

Thanks for the advice, all. Lump sum it is, then.