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Lump Sum Investing (LSI) or Dollar Cost Averaging (DCA)? Which Strategy Is the Better Choice?

A study by Vanguard shows that Lump Sum Investing (LSI) outperforms Dollar Cost Averaging (DCA) in approximately 68% of cases when investing in the MSCI World index. This also applies to the S&P 500. However, this method carries risks: For example, someone who invested the entire sum in the S&P 500 in March 2000 would have suffered a loss of over 45% within two and a half years and would have had to wait nearly seven years to regain the original value. After the bursting of the housing bubble, DCA would have resulted in worse performance.

To offer a solution, a strategy based on technical analysis was developed to determine entry and exit prices. Its goal is to minimize drawdowns and achieve higher returns than the underlying asset. So far, this method has consistently delivered better performance with lower drawdowns.

The strategy also features a low trading frequency: for ETFs, it averages fewer than one trade per year, and for cryptocurrencies fewer than four. This allows investors to maintain a passive investment approach.

To demonstrate its effectiveness, the strategy will be available free of charge until the end of the next recession.