The TRUTH About Dollar Cost Averaging Most Investors Miss

Lump-sum vs. dollar cost averaging - what's the better investment strategy? We break down the math, the emotions, and the real-world case studies behind each approach to help you make smarter decisions. Discover the right time to use each and how to avoid analysis paralysis with our Goldilocks Rule. ⁠Jump start your journey with our FREE financial resources⁠⁠ ⁠⁠Reach your goals faster with our products⁠⁠ ⁠⁠Take the relationship to the next level: become a client⁠⁠ ⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠ ⁠⁠Connect with us on social media for more content⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:57Brian Preston?

  It's the age-old battle. Lump sum versus dollar-cost averaging.

• 1:08Speaker 03

  Brian, I am so excited to talk about this because inevitably, at some point through your financial life, something's going to happen. You're going to have a windfall, or a bonus, or some money coming to your possession. You say, "Man, I need to figure out what to do with this money. How do I put it to work so that it can work harder than I do with my brain, my back, and my hands?"

• 1:29Brian Preston?

  Well, I want you to... We got you covered because you're going to find out that there's actually a place for both of these tools. But before we jump into it, Bo, you want to... We ought to go ahead and just... Anybody who's new to finance, and we're picking up constantly thousands of people every month who are brand-new to our channel. Let's explain what is lump sum investing and what is dollar-cost averaging.

• 1:49Speaker 03

  Yeah, let's do some Webster Dictionary-type definitions. Lump sum just simply means investing a large sum of money all at once rather than spreading out that investment over time. Whereas, if you think about dollar-cost averaging, it's actually investing a large sum of money in smaller, equal-dollar amounts over time at a regular frequency, and that frequency It could be like weekly, monthly, etc. So if you think about this and you said, okay, I've got some money to invest and I've got $500 a month. Should I do it monthly or should I do it at the beginning of the year? How would that practically look? We want to show you a visual example. So to lump sum invest is pretty straightforward.

• 2:28Speaker 03

  At the very beginning of your period, if you had $6,000, you just dump it in right there at the beginning, $6,000.

• 2:35Brian Preston?

  Now, look, it is interesting when you look at a visual of this and is that you see the market does look, it's definitely higher, but there's a lot of gyrations and volatility. And this is just us choosing just the last year. It's not like we scientifically said, let's just go look at 12 months. So, but what would it look like if you were actually doing this from a dollar cost averaging standpoint?

• 2:56Speaker 03

  Yeah, if you were going to dollar cost average $500 on a monthly basis, you would have 12 different entry points over the course of the year. On the same day, every month, you would put in 500 and then on that day of the next month, 500 and 500 and 500. And what's actually happening as you're putting this money to work, you are investing a fixed dollar amount such that your cost per share of whatever investment or industry you're buying is being averaged out over time. That's how they come up with a name, dollar cost averaging, systematically putting your money to work over time.

• 3:32Brian Preston?

  Well, I think you're probably, if, when I looked at that visual, I would be saying, well, I can see that the market was higher. So it looks like lump sum would have been better, but man, it probably felt good from an emotional standpoint on those months that the market was getting its teeth kicked in or had a little extra volatility. If I was buying that $500 then, so, but can you explain to me, how does this actually look? If we, because we just gave the example, but let's actually put some numbers to it and actually walk through a case study on this too.

• 4:03Speaker 03

  Well, I imagine the question people are asking is which one is better? Like which one, should I lump sum invest or should I DCA? How do I know which one turns out better? So again, if we think about this case study, you have two different investors. One invests $6,000 at the very beginning of the period. The way we're just for those of you out there listening on Spotify or iTunes. We're just looking at the S and P 500 from March of 2024 through March of 2025. So this most recently completed 12 month period. And we said, okay, the lump sum investor is going to invest $6,000 right at March in 2024. And the dollar cost averager is going to do $500 a month, every month, all the way from March of 24 to March of 25.

• 4:45Speaker 03

  Well, as we get to the end of the 12 month period, the lump sum investor, the one who dumped in the $6,000, that investment would now have turned into $7,767. When you compare that to the dollar cost averager, that sum, those $500 each month over 12 months turns into $6,686. So in this case, it looks like, oh, lump sum must be better.

• 5:15Brian Preston?

  For sure. I mean, think about that. That's almost an $1,100 difference in just a one year period. I would solidly be in team lump sum and that makes sense. I mean, because if you think about it, as we've shared with you, markets typically go up over the long term. So that, that, that, this makes sense. But so right now I would tell you I'd be on team lump sum.

• 5:38Speaker 03

  Yeah. So if markets go up over the long term, the idea, the conceptual way you think about this is the longer my money is invested, the longer it could be working, the better off it would be. So mathematically, if markets are up eight out of 10 years, it seems prudent and rational that lump sum investing would come out ahead more often than dollar cost averaging.

• 6:02Brian Preston?

  So much so, the Vanguard does a study and we love looking at this one. Every, every so often they update this study and it stays pretty consistent. But you can see from the, the most recent version we were able to pull. Lump sum does win out 68% of the time. If you're 100% equity investment.

• 6:21Speaker 03

  And again, that makes sense because more often than not, the market is up. And if there's a long-term upward trend in the market, then it seems like that's what would come out better most of the time.

• 6:33Brian Preston?

  But I do feel like we need to put the caveat. If you read the same Vanguard research study, and we've done this, like I said, several times, we've done many episodes because we've been doing content since 2006. I'm amazed at how similar this number, if you actually compare lump sum to dollar cost averaging over an extended period of time, you quickly see that the actual performance difference is only around 2%.

• 6:58Speaker 03

  Oh, okay, so let me get this right. So 68% of the time lump sum is better, but on average, how much better it is, is only a 2% difference?

• 7:06Brian Preston?

  Now you're seeing how this is a little more nuanced. I mean, and look, we can go ahead and we can show you, it is great to be an S and P 500 investor. Because if you just, we went back to, this chart goes all the way back to 1989 to present. You can see you'd be up 3,300%. Nobody is going to be upset about that. And by the way, we're not saying dollar cost average for like years on end. We're talking about, should you think about the entry point for just a short period of time to maybe figure out of some volatility or mind issues, you know, behavioral stuff comes into play too.

• 7:43Speaker 03

  Yeah, that's the question that people ask. All right, if the market, you're showing us the S and P 500, it's just up substantially over long periods of time. Why on earth would I dollar cost average if 68% of the time lump sum turns out better? And it only turns out 2% better. Why would I ever consider dollar cost averaging if there's not a huge difference? Well, there are a few reasons. And one of the ones, one you just alluded to, it does smooth out the entry point rather than try to decide, I mean, how many times have you been in the situation where you turn on the nightly news and, oh, markets are reaching all-time highs? And you think to yourself, oh, gosh, I don't want to invest right now because markets at all-time high and Warren Buffett told me that I should buy low and sell high, or maybe. You turn on the nightly news and it says, oh, the sky is falling, markets crash.

• 8:28Speaker 03

  You think, oh, no, this is a horrible time to invest. Well, if you're dollar cost averaging, your entry points get to be at all of those time periods. You have to worry if you're making the absolute worst decision at that point in time.

• 8:41Brian Preston?

  So it definitely smoothes out the entry point, but here's the big thing, the takeaway for me is that just we gave you the math that the Vanguard study showed that 68% of the time it was better for lump sum. But that still leaves the other 32%. That means if we have down years, you're probably going to sleep a heck of a lot better, especially if this was life changing money. Cause we, we just came through a period here where the market has had volatility just in the last month and a half.

• 9:12Speaker 03

  Absolutely.

• 9:13Brian Preston?

  And you gotta tell, you cannot tell me that the emotional just gut check that people get when you put all this money in at once. There's a cost to that. So we want, we wanted to kind of look at some case studies and say, we saw where lump sum just on the last year was hands down a huge winner. I mean, I'm talking about by double digits, but how about if we did a case study for a period where maybe the market just wasn't as rosy? Cause it was part of that 32%.

• 9:42Speaker 03

  Yeah. So what does it actually look like when dollar cost averaging beats lump sum? And you just said that this tends to happen in periods where things are the most scary, the most uncomfortable, the most volatile. So if we take two investors, let's take lump sum Larry and let's say that lump sum Larry is going to invest $120,000. And he gets this lump sum and he's going to invest on October the first of 2008. Now I know we have a lot of younger listeners out there who perhaps were not investing in 2008, 2009. So if that's describes you, this may not have been the very best time to begin your investing journey to put some money to work.

• 10:22Brian Preston?

  Yeah, I know. Let me throw out two names that you don't see anymore, but they were everywhere. Lehman Brothers, Bear Stearns, these things, you 2008, I'll never forget. This is, it is like a. Shot heard around the world with how fast, how fast things change when we hit the great recession.

• 10:40Speaker 03

  So Lumpsum Larry dumps in 120,000 on October 1st, 2008. Well, now, let's look at his counterpart. Let's look at DCA Diane. Rather than investing 120,000 all at once, she decides she's going to put, invest 10,000 each month over the course of 12 months, starting on October 1st of 2008, going all the way to October 1st of 2009. And by the way, that was an incredibly volatile, incredibly tumultuous time in the market when you look back historically. And so when we look at the outcome of these two investors, Lumpsum Larry invested 120,000 in that 12-month period, and he actually has about 108,000 at the end of the 12-month period.

• 11:25Brian Preston?

  But pause, because this is if, this is why it's important to be a long-term investor. Because when I see, when you look at this and you say you put 120 in, a year later, it's 108. That's not telling half the story. Because if you're visually, and I'm saying this for all my podcast listeners, if you looked at this visual that we have right before us right now, yes, he put 120,000 in, but when we got around March of 2009, this thing was halved.

• 11:51Speaker 03

  Cut in half.

• 11:52Brian Preston?

  I mean, it is cut in half. Now, fortunately, you've heard us talk about the pluck effect and other things, is that when markets, when you reach periods where markets have become irrational and detached from the actual intrinsic value of the markets, it's not uncommon that people panic, sell, you lose, and if you will just stay the course, you will actually recover through that V-shaped recovery. And that's why Lumpsum Larry, if he stayed the course, he still came out with 108,000. But the key takeaway, and this is something we're good, because Bo's about to show you why dollar cost averaging could actually be a superpower or helpful thing. The biggest thing I know we do as professional financial planners is, is that I try to protect people from themselves.

• 12:35Speaker 03

  That's right.

• 12:36Brian Preston?

  Is because the majority of people, if you're going to cry uncle and jump out of the market and go to cash, and by the way, it's Not my opinion. If you go look at what happened to cash levels during these times, all time highs. So at peak market opportunity, because you can't tell me if you're buying in March of 2009, you are just, you're just a pig in slop. You are so happy with your decision that you made, but that's not what Americans are doing. We typically head for the exits as soon as the opportunity shows up, and that's what we try to help people from. So one of the tools we use is dollar cost averaging.

• 13:12Speaker 03

  And the reason why is again, lump sum Larry invested 120,000, only has 108,000 after that 12 months. DCA Diane, who was buying systematically, actually made money on over that exact same period.

• 13:24Brian Preston?

  You're like, what?

• 13:24Speaker 03

  She invested $120,000 and she actually has over $145,000. So over that 12 month period, you have two investors, one who lost money, one who was actually able to capitalize and make money. But again, that only tells part of the story and we are not short-term investors. We don't just think about investing over a 12 month period. But if you do take these two investors, based on when they started, and you extrapolated this out all the way to present day, looking to right now in March of 2025, lump sum Larry, without investing another dollar, that $120,000 he invested is now worth over $833,000.

• 14:04Brian Preston?

  That's incredible. I mean, that's why it's great to be an investor.

• 14:06Speaker 03

  So even if you get your timing wrong and you make a bad decision, the market freaks out. If you give it enough time, odds are you're going to come out okay. But if you are someone like DCA Diane, who can buy through the turmoil, she's sitting here today, same $120,000 invested, with over 1.14 million dollars. Just the behavioral difference in that 12 month period is worth hundreds of thousands of dollars down the line.

• 14:34Brian Preston?

  Now you're starting to catch on why this matters based upon also how big this money is and how much it means to you in life. And there's something when we start talking about, because as we transition into now the other side of the coin, why would you dollar cost average? Something that comes up, it's a, it's a unique little term is sequence. Of return risk and this is what you're worried about if you retired in 2008. This is your worst nightmare.

• 15:01Speaker 03

  Yep.

• 15:01Brian Preston?

  So that's why it's important to have, understand what your tools are and other opportunities and how you can mitigate these risks that you might be facing with your money.

• 15:10Speaker 03

  And we've kind of been skirting all around this, this idea of, okay, well, DCA, it can smooth out your entry point. That's sort of like a mathematical thing. It can outperform during like market turmoil. Again, that's sort of like mathematics, what happens. It can mitigate sequence of return risk. Again, we're talking about like portfolio theory and what happens. But this last point is the number one reason why we recommend it. It's the number one reason why when someone comes in a lump sum, we think DCA likely makes sense. Is it eases the emotional volatility? Because the worst thing that can happen is you decide that you've got this money. And again, you want to put this money to work and you want it to work harder than you do. And you're someone like lump sum Larry who gets so excited, he says, you know what?

• 15:52Speaker 03

  I'm going to invest my dollars and immediately after you do that, the market tanks. And maybe that happens over the next month or three months or six months. And you begin thinking to yourself, oh no, what have I done?

• 16:06Brian Preston?

  Yeah, it's definitely the emotion part, the behavioral stuff is a key component of this entire endeavor. You know, when I think about ways to dollar cost average, here's the good news. The majority of you are already doing that.

• 16:20Speaker 03

  Yep.

• 16:20Brian Preston?

  If you think about the fact, if you've set up your, you know, automatic for the people, you want to fund your Roth IRA and that's $7,000, if you're funding that monthly, you're dollar cost averaging. It just by the automatic account builder that you set up. If you're somebody who has a 401k, your employer offers a 401k with a matching, you've signed up to where every month when you get paid, money goes into the markets, you're automatically dollar cost averaging. So this stuff is kind of already happening just in a systematic way with a lot of the ways we save and build assets for retirement.

• 16:51Speaker 03

  So when we're thinking about, okay, should I lump sum or should I dollar cost average? Or how do I decide? There are a few key takeaways we want you to rest on. The first one is know thyself. Under Understand what your unique financial personality are. It's not uncommon for us to have a client who has million dollar portfolios, but there is a single stock holding that represents a relatively small portion of their financial net worth. And depending on what that individual stock is doing for the day will drive what their emotions are. If that sounds like you and that describes you and you're someone who allows your emotions to be impacted by what the broad markets are doing or by what an individual position is doing.

• 17:35Speaker 03

  Then you might be someone who needs to DCA because what DCA ultimately does is it removes the emotions out of the equation. You have a pragmatic and prudent approach to putting your dollars to work without having to get caught up in the emotional turmoil.

• 17:49Brian Preston?

  Well, always, a lot of people, this is going to shock people because we're just so transparent with it. We don't know what the market's going to do next year.

• 17:57Speaker 03

  That's right.

• 17:58Brian Preston?

  For the next two years. I know over the long term, I mean, historically it's done very well. And by the way, the news media, they don't know either. So it's always hard when somebody comes to me with, you know, say they have a lump sum from, you know, a retirement payout. Or they sold some real estate or other things and they'll say, hey, should we, should we put it all in? And I'm like, hell.

• 18:19Speaker 03

  We can, you could.

• 18:21Brian Preston?

  If you could tell me, if you could tell me what the market's going to do over the next year. Now, look, we don't like the dollar cost average for extended periods because the market, we know it's going up most years. So you do want to get in there, but there does come a value to trying to figure out, hey, maybe we should make sure you don't overreact or panic because this is, this is money that you're counting on. There's ways I can mitigate this so you don't have to bear all this risk. Even like we looked at that 12 month chart, Bo. I mean, you think about the difference. I know there's a performance gap there, but there's a lot of like in this last month where we had a drop in the market of 10% in like a two week period.

• 19:01Brian Preston?

  You can't tell me even the person who was up a full, you know, double digits over the person who dollar cost average. They would probably say, no, I'd be willing to trade now because they don't know where the knife is going. To fall.

• 19:14Speaker 03

  Sure.

• 19:14Brian Preston?

  So know thyself is very important from a behavioral standpoint. And that's why I love that we can actually use both tools when we're doing financial planning.

• 19:23Speaker 03

  Another takeaway is we want you to avoid analysis paralysis. Again, oftentimes when we have these financial decisions, we get so stuck on, okay, uh, am I going to lump sum? Or am I going to dollar cost average? I can't decide what am I going to do? When am I going to start? How am I going to do it? And you end up doing nothing. If one of these strategies will cause you to begin moving forward, and often it's DCA that allows you to do this. It would at least get you moving in the right direction. Cause what we don't want to have happen is your money sit on the sidelines, sit on the sidelines, sit on the sidelines. And you wait until things feel more comfortable and feel better. And what you've actually done is missed all of the really, really exciting opportunities. So if you can implement one of these strategies, it will prevent you from analyzing yourself to death and not actually doing anything. Doing something is better than doing nothing.

• 20:09Brian Preston?

  Well, let me give you an example of analysis paralysis. We've been doing this long enough, but there are people that, well, unfortunately they fall prey to their emotions and they just sell it all.

• 20:18Speaker 03

  Yep.

• 20:18Brian Preston?

  And then they're stuck there for six months. You think about like that 2008 to 2009 period, they're stuck there. They sold, they feel so brilliant and they feel so good because they avoided all the crazy stuff or they avoided a portion of it. Um, or maybe they sold at the, the, the dead bottom of it. But then they watched the market start to recover and they're still sitting there in cash.

• 20:37Speaker 03

  When am I going to get back in?

• 20:38Brian Preston?

  It, it rips your heart out the other way because when you time the market, you don't have to get it right once. You have to get it right twice. You have to sell before the market drops. You also have to buy back in before it goes up. And that's just an impossible task. So when we have people come to us with these struggles, we always say, let's break through the analysis paralysis. Let's come up with a plan. This is a large enough sum of money that we can dollar cost average. And that's why the, the next point we always point to is you need to consider the size of the investment. Because if you're somebody, you know, if your net worth is a hundred thousand dollars and somehow you, maybe you inherited a hundred thousand. Or like I said, you sold a piece of real estate or you had a pension or something come your way. If you put that hundred thousand dollars in there.

• 21:23Brian Preston?

  You would be like, oh my gosh, this is life changing money. So we've actually come up with what we call the Goldilocks rule to try to give you the best of both worlds. Take advantage of lump sum investing because markets typically go up, but also mitigating the behavioral stuff and letting you spread it out so that you don't get caught in the next great recession.

• 21:45Speaker 03

  So when you think about the amount of money you're considering, either lump sum or dollar cost averaging, you want to compare it relative to your other liquid net worth, to your other portion of your portfolio. So that way you can determine how large is this relative? If you're someone who comes into a hundred thousand dollars and you have a five million dollar portfolio, the hundred thousand dollars might not be as substantial. If you're someone like Brian just said, who has a hundred thousand dollar portfolio and you come into another hundred, well now it is substantial. So here's our little rule of thumb.

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• 22:20Speaker 04

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• 22:45Speaker 00

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• 23:12Speaker 03

  If the amount of money you're coming into, either from an inheritance or a bonus, or you sell a piece of property or you have money come your way, if it's less than 10% of your liquid net worth, we think you probably ought to just go ahead and lump sum that. Don't make it any more complicated than it needs to be. If it's 10 to 20% of your investable net worth, probably think. About DCAing over a course of about four months. If it's 20 to 30%, maybe six months, 30 to 40%, eight months. 40 to 50% of your liquid net worth, consider DCAing over 10 months. And then if it's greater than 50%, if the amount of money coming into your possession is greater than 50%, there's nothing wrong with thinking about easing that into the market over the course of a full year, taking 12 months.

• 23:57Speaker 03

  So here's a really easy example. If you had an investable net worth of $100,000 and you had a windfall of $50,000, that would be 50% of your liquid net worth. You would just invest $4,166 each month for the next 12 months to get all $50,000 of that put to work in the market.

• 24:16Brian Preston?

  And here's another contrarian thing of what I love about the Goldilocks rule, is when you dollar cost average with a lump sum and then remember every year, every year, the average intra-year volatility is 14%. So if you are dollar cost averaging and then you hit bear market, because every now and then we hit bear markets, typically twice a decade, you'll hit a bear market. If for some chance the market went down 20% while you're dollar cost averaging, there's nothing that says that you can't come up with a systematic, we've even done content on this, you can accelerate to even take advantage of that opportunity. So not only does dollar cost averaging allow you to spread it out so you don't get caught in the next great recession,

• 25:01Brian Preston?

  it actually gives you an additional tool in your tool belt to maximize the opportunity. If you went back to 2008, 2009, it would be the ideal time. We kept it simple by just dollar cost averaging in a normal fashion every month. But if we would apply that to the example, it would have amplified it even more. So that's why I love that we're giving you rules, we're giving you real world opportunities so you can maximize your financial life.

• 25:30Speaker 03

  Now often when we talk about dollar cost averaging versus lump sum, we're talking about how to invest, how to put our money to work, how to get money working for us. But there's actually another instance where this comes into play and this is often not talked about a ton. When it comes Time for us to exit a position or to liquidate a portfolio or to come up with cash. What's the best way to get out of the market? Should I lump some out, meaning sell everything right now today? Or should I dollar cost divest or dollar cost average my way out of that? How do people go about deciding that?

• 26:06Brian Preston?

  Well, we see things come our way all the time where somebody works for a company. Or maybe you made a big play in a single stock. I mean, I have a really close friend. I covered it in Millionaire Mission that he put like 10 grand in Apple during the Great Recession.

• 26:22Speaker 03

  Turned out pretty good for him.

• 26:24Brian Preston?

  It's worth a lot of money. At some point, he's going to need to figure out a way to diversify that. We're still relatively young enough. I think he's fine, but at some point, he's going to need to diversify. And it's hard to figure out what's the right time to do this. So you're probably want to consider dollar cost averaging out of position. We also, Bo, we talk, we work with a lot of people who work with companies that they incentivize you with restricted stock. RSUs.

• 26:55Speaker 03

  Maybe you're someone who had those RSUs and when they vested, you didn't do anything with them. And now the company has done really, really well. And you have this large position with some embedded gains. Or maybe you inherited some assets, but you didn't really think a whole lot about them. And now you're trying to figure out, okay, well, do I sell? Do I keep? How do I navigate this? Or maybe this sounds like you. Have you been someone who said, you know what? I've got this goal. Maybe I want to pay for a wedding or I want to buy a new home or I want to invest in a second home and a vacation property. But I don't know the timing. So I've been putting money in my after tax account, building that up through time. But now we're getting to the point where I want to start getting access to those funds. How do I do it?

• 27:38Speaker 03

  Do I sell everything today and free up that cash? Or do I come up with a plan? All of these are different scenarios where you're going to have to decide, how do I exit the position? And what's the best way to go about doing?

• 27:54Brian Preston?

  Yeah, this is, and we even, I think it'd be helpful if we walked through an example.

• 27:59Speaker 03

  Sure.

• 27:59Brian Preston?

  And we even, we said, let's not, because we could have gone many different ways. So, you know, we could have done Nvidia or some other, but he's like, no, let's choose, you know, because there's a lot of people that bought Apple. So let's do an example of what Apple looks like if you were trying to get out of it.

• 28:13Speaker 03

  Yeah, and we just said, let's look at the last six months, right? If you're someone who had a position in Apple stock over the last six months, and you said, you know what? I am a genius. I'm going to exit this position. I'm going to lump some. I got a big old brain and I'm going to sell it right at the end of 2024. And man, that would have been wonderful. Because if you had done that, you would have hit the very top of the market. You would be feeling like a genius if you made that decision. But maybe you didn't make that decision. Maybe you're someone who says, okay, oh, man, it hit an all time high, but Apple's still great and I've got some money to run and, oh, you know what, though? I'm going to sell it in March. And now, all of a sudden, it's not high as it was back in

• 28:55Speaker 03

  December. You're beginning to think, okay, maybe I don't have this figured out. Because that's in that timeframe, and literally just a three month timeframe, it was a change of $50 per share, which could be substantial when you think about exiting the position.

• 29:09Brian Preston?

  Yeah, I mean, for those of you, once again, listening to the podcast, you're not seeing the visual, this looks like a W on the screen. And so it just shows you how hard it is. And so you know, there's going to be some emotional trauma, no matter, now, look, you might get lucky. Sometimes it's so much better to be lucky than good, is because you could sell this thing at the tippity top, but probably three years, five years, you're still going to have some regret.

• 29:32Speaker 03

  It's going to be even higher, yeah.

• 29:33Brian Preston?

  Because it's going to be even higher. But this, what I love is if I can come up with a systematic way to take the emotion out of it, and also to protect you from the rapid, huge changes, that's going to be the better way to consider this. Now, look, it's not an all or nothing. Because we know, Beau, there are a lot of things that you need to take into consideration, especially when you're dollar cost averaging out of investments. We even had this discussion in our content meeting when we were talking to the writing team, is that there's some, some big things that you got to take into account, like Taxes.

• 30:04Speaker 03

  It's a huge one, yep.

• 30:05Brian Preston?

  I mean, because think about the fact that you might be able to, if you sold all at once, it might push you into a higher tax bracket, surcharges and all kinds of other things. Or maybe you could spread it out over a little bit and bring it, bring down the tax rates depending on where the capital gains are. There's lots of playing, there's even 0% capital gains rates that are out there too, that you can use in planning. So if you're not taking into account taxes, you're missing out.

• 30:31Speaker 03

  Another thing to think through is the emotions of it. Are you someone who if you sell today and the stock goes up after today, you're never going to forgive yourself? Or are you someone that if you don't sell today and the stock goes down, you're never going to forgive yourself? If that either one does describe you, you may want to remove the emotion from it. Anytime we don't know what's going to happen in the future and we find ourselves being emotional, we want to implement a system or a strategy that removes emotion from the equation. And dollar cost averaging is a great thing to do that because if I sell today and the market goes up, great, I still have exposure if I'm dollar cost averaging. If I sell today and the market goes down, great, I capitalized on a higher price. It literally allows you to live in the best of both worlds.

• 31:15Speaker 03

  So emotions and your own unique emotions are another consideration you should have in addition to taxes.

• 31:20Brian Preston?

  And that brings up the last one, which kind of pulls all this together. And that's just risk.

• 31:25Speaker 03

  Yep.

• 31:25Brian Preston?

  I mean, one of the biggest things that happens to us as financial planners is people will come to us with these concentrated portfolios. And it's now up to us to figure out how we take into account both the taxes, the emotions, but then also to educate them on that there's real risk. Look, we use an example of Apple. Apple by all indications, great company, going to be here forever or whatever. And you feel some comfort with it. But I've worked with, you know, Lucent Technology, other executives in the past where they had the exact same feeling that probably people at Apple, you just don't know. And sometimes when you've won the game financially, it's not about running up the scoreboard. There is this component, we always talk about risk tolerance.

• 32:08Brian Preston?

  And a lot of people out there, you're watching this and you're like, I'm a cowboy. I am a cowgirl. I can handle whatever. The market throws my way, but there's another component that is going to just wake you up called risk capacity. You might be getting to the age, you don't have enough time for your, because you're living off these assets. You're pulling money out of this portfolio. If the market get crushes crushed too much at the wrong time, you don't have enough time to recover that you're going to eat it alive by pulling principal out during that. If you're not taking into account the risk after you've won the game, that's, that's a problem because yes, you might be leaving some money on the table, but wouldn't you rather have success without the risk of absolute loss

• 32:52Brian Preston?

  versus trying to run up the scoreboard when you've already met all your financial goals? There's a balance there.

• 32:58Speaker 03

  So we've walked through, okay, when does lump sum investing make sense? And then when does dollar cost average investing make sense? And when does lump sum divesting make sense? And when does dollar cost divesting make sense? And you're probably thinking, okay, well, guys, which one do I do? You laid out all these scenarios, you did not tell me the right answer. This is the key takeaway that we would give you is as you're approaching these decisions, don't overthink it because oftentimes we get caught in analysis paralysis, but we know this as investors. If we give ourselves a long enough timeline and we allow our dollars to work long enough, it likely doesn't matter if we invest it at the world's worst time or if we exited the position before it hit its all time high.

• 33:43Speaker 03

  If we can put a systematic strategic plan in place and we can do that consistently over time, odds are we're still going to be able to accomplish our financial goals. We're still going to get to where we ultimately want to be. What we have to do is we have to remove the ability for us to make the really, really bad, really, really dangerous decisions. And you have to answer that for yourself. Which one of these strategies is going to set me up for the largest amount of success personally? Less so mathematically.

• 34:16Brian Preston?

  I love that we get to create educational content so that you are better with your money. You can grow your money that much faster, but I. ... everyone that you will get to a point that success creates complexity. And without a doubt, everything we've covered today, because we're talking about primarily when you're talking about lump sum versus dollar cost averaging, we're talking about when you kind of have large sums of money come your way and you're just trying to make sure you don't screw this up because it's probably not, you're not getting another inheritance, you're not selling another piece of real estate like this, you're not selling a business. You need to stick the landing on this because it's that important to your financial life. That's complexity. And that's why I love that we get to give you all this free advice.

• 34:59Brian Preston?

  And the way our policy and our system works is, it's called the abundance cycle. We don't get anything out of you until you've actually reached a level of success that you say, maybe I need to take this relationship to the next level. And that's why we have, if you want to go to moneyguy.com, we have a become a client section. Watch a short video on us, and this is the stuff we do. We maximize, help you navigate this stuff so you know that there is a better way to do money. Why not make sure that your money is doing everything it possibly can so you can sleep comfortably at night and you know that you're making the best decision possible. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy Team, out.

• 35:41Speaker 03

  The Money Guy Show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.

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