Always smart to have a 3-6 month emergency fund. If you’re concerned about the market tanking after you make a large deposit, take your budgeted amount and divide by 6 or 12 and just DCA into the market over the next few months.

Investing is the long game. Put it in and leave it alone. Keep adding to it. Ignore the current market as that is irrelevant in terms of multi decade investing. That’s how you build wealth.

True. And I agree in principle. Just hard to look at accessible cash and not cringe a little when the market dips.

I'm fairly new to having enough left over at the end of the month to put a decent amount into savings, and it's hard not to focus on that savings account number growing larger.

Even though I know that, especially right now, it's not even keeping up with inflation. It's definitely a mental block.

Settle on an amount you can comfortably do and do it no matter what the market does. Always be investing!

I avoid putting in lump sums when possible and instead dollar cost average on a weekly or monthly basis.

if you have a specific goal/need for the money, high yield savings account, if it is money that isn't emergency fund, isn't to save for a short term purchase, then index funds will do you well.

That’s fair, but it’s not the smartest.

If the market on average goes up, or goes up on average at any given time. DCA means on average missing out on some growth. The optimal thing is to invest as much as you can afford as soon as you have the money. If you have a big lump, invest it now.

It’s not a huge difference and DCA can feel safer, but in plain math it loses out.

The next "greatest bull market ever" will probably happen a couple of times in your lifetime. You want to be as invested as possible before that happens and nobody can predict when it will.

If you need that money for other priorities that's one thing. Go spend it on that instead. If this is money for retirement then it isn't doing the job you assigned it while it is parked in cash.

The only reason to invest is if you think the market will, eventually, go up. That’s been the trend, so that’s the thinking.

No one is any good at figuring out when it will go up or down in the short term. If this is the low point, of course you should buy! If it’s going to drop further, you should wait! But nobody knows.

Because the market on average tends to go up; at any given time investing now on average means you’ll capture more of that growth, and waiting means on average you’ll miss out out growth. Not always, like you saw over the last year, but usually.

The biggest mistake with a lot of investing is being too nervous. Missing the gains and only investing afterwards is also a way to at least lose in opportunity cost.

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That’s something I always wondered. If the long term plan is to benefit from the the slow but gradual growth, due to time invested, wouldn’t the best option be to get in as early as possible with a lump sum?

Yes, but most of the time we don’t have lump sums. We earn X dollars, and we can afford to invest Y of that. So every two weeks or month, we should invest Y.

It still looks like a steady trickle, but DCA is doing that on purpose, and “continuous lump sum” is because there’s only so much money at any time, but it gets invested immediately.

I opened up a Roth IRA and put in a lump sum in dec 2021 (terrible timing, I know), and now I wished I would have done DCA to minimize risk.

Yes, that sometimes happens. This is about averages. On average, if every year you DCA, there are more years that you’ll feel like you missed out than years that you’ll kick yourself.