Imagine receiving $100,000 tomorrow.

Imagine receiving $100,000 tomorrow. Would you invest it all at once right away? Or would you invest it gradually over time? Well, that's an interesting question and that's what I want to break down in this video. Lump sum investing versus dollar cost averaging. We'll start by explaining each investing strategy and then jump into some real research that might surprise you. So smash that like button and let's get started. Welcome to Martic Finance, where we explain investing concepts in a simple way. But first of all, a quick disclaimer. This is not financial advice. Let's start with dollar cost averaging or DCA for short. In this popular investing strategy, instead of investing a large amount of money all at once, you spread your investment out into smaller and equal amounts over a period of time, say monthly or quarterly. But why do people do this? The main idea is to reduce short-term risk. Markets go up and down all the time. And nobody knows exactly when the best time to buy is. In this way, you avoid putting all your money in at once when prices might be high. For example, imagine you have $12,000 to invest. Instead of investing it all on day one, you might invest $1,000 each month for 12 months. If the market drops in a certain month, your $1,000 will buy more shares (due to cheaper price). If the market rises, you'll buy fewer shares (due to higher price). This strategy helps smooth out volatility and can lower your average cost per share. If markets tend to rise over time, your money is gradually put to work rather than all at once. Potentially lower your overall returns. Another downside to DCA that people don't always talk about is something called cash drag. Basically, while you're slowly investing your money over months or years, the portion that's sitting in cash is losing value to inflation. More valuable, less valuable. So if inflation is 3% and you're holding onto thousands of dollars waiting to invest, that money is quietly shrinking in purchasing power. Lump sum avoids this by putting all your cash to work immediately. Now let's talk about lump sum investing or LSI. This is the strategy of investing all your money at once, instead of spreading it out over time. The main argument for lump sum investing is simple. "Markets go up more often than they go down." According to Fisher Investments, about 74% of years the S&P 500 finished higher than it started.