Buying over time versus buying in one go

The evidence on this is clearer than most people assume, and so is the reason most people should ignore part of it.

What each actually does

Lump sum puts everything in now. In an asset that rises over long periods, being invested sooner usually wins on average.

Dollar cost averaging spreads purchases over time. It gives up some expected return in exchange for a much narrower range of outcomes and a far better chance you stick with it.

Why the mathematical answer is not always the right one

Lump sum wins on average. It also produces the scenario where you invest everything the day before a 60 percent fall, and most people who experience that sell at the bottom and never return. A strategy you abandon returns nothing regardless of its expected value.

If you would find that outcome intolerable, spreading purchases is not irrational. It is buying a behavioural outcome, and that has real value.

What actually matters more than either

• Automate it, so the decision is not made repeatedly under emotion.
• Decide your total allocation first, then how to deploy it.
• Do not stop buying because the price fell. That is the entire point of the plan.
• Do not increase it because the price rose. That is the opposite of the plan.

Common questions

Is DCA better than lump sum for crypto?

Lump sum wins more often on average. DCA narrows the range of outcomes and makes you far more likely to stay invested, which for most people is worth more than the average.

When is the best time to buy crypto?

Nobody knows, including people who sound certain. That uncertainty is the argument for a mechanical plan you can follow rather than repeated judgement calls.