'Lump sum' versus 'average in' face-off - which investment approach wins?

 A lump-sum investment approach versus averaging in tends to outperform over most time periods, but at bigger risk.  Paul Hutchinson sets out why a multi-asset fund may take some of the stress out of the decision.

Nick Maggiulli in his bestselling book, Just Keep Buying, addresses the question of whether to ‘Invest now’ (lump sum on day one) or ‘Over time’ (average in over 12-months). Maggiulli demonstrates that if you invested into the S&P500 over its history, averaging in underperforms the lump sum-upfront approach most of the time. In fact, the ‘Invest now’ approach outperforms ‘Average In’ by 4% in each rolling 12-month period, on average, and three quarters (76%) of all rolling 12-month periods from 1997 to 2020.

The best time to plant a tree is 20 years ago. The second-best time is now.
- Chinese proverb

Maggiulli repeated the exercise for several different asset classes, including Bitcoin, US treasuries, gold, developed and emerging market stocks, etc., and, while the percentages differ, the conclusion is the same. Most the time the ‘Invest now’ approach is superior to averaging in.

Read full article: https://ninetyone.com/en/south-africa/insights/lump-sum-versus-average-in-face-off-which-investment-approach-wins

July 11 2023 By Paul Hutchinson - Ninety One