With a lot of people considering whether to drop an IRA contribution in as a lump sum vs. dollar-cost-averaging (DCA) over the course of the year, I've seen a lot of very boldly parroted advice that exaggerates significantly.
While lump sum is more likely to outperform DCA, it is a statistically riskier proposition. There is a not insignificant probability that DCA could outperform since lump sum has a higher standard deviation than DCA.
Here is a good article. https://www.onefpa.org/journal/Pages/OCT15-Dollar-Cost-Averaging-The-Trade-Off-Between-Risk-and-Return.aspx
Regardless of whether you are willing to take on the extra risk or not, know that the study that found lump sum investing out-performed more often only suggested that an ending portfolio balance would be, on average, about 2% higher!
Now let's compare that with some other wisdom often peddled here: the Target date fund. The Fidelity FDEEX fund, for example, has a .75 expense ratio (ER). If you instead invested in a 0% ER S&P 500 fund from Fidelity, saving on the expense ratio alone would mean roughly a 15-25% bigger balance in retirement depending on how long you save for retirement. This doesn't even take into account that Target Date funds typically under-perform the S&P 500 significantly because they needlessly expose individuals decades from retirement to the under-performing (by comparison) asset class of bonds.
My point is to remember to take the commonly toted sayings here with a grain of salt, remember that some decisions can have a much bigger impact than others, even if you are "right", and also remember that when you think you are "right" you may be distorting or oversimplifying the real facts.
Edit:
Here is a calculator to see how much your ER could cost you.
Submitted January 03, 2019 at 08:41PM by myprecioussssss http://bit.ly/2SxZVne
