Investment Strategies: Dollar-Cost Averaging vs. Lump-Sum Investing

What is one psychological benefit of dollar-cost averaging?

• It reduces anxiety by not investing the entire amount at once.

• It eliminates all investment risks.

• It ensures you always buy at the lowest price.

• It guarantees higher returns.

What is a potential downside of dollar-cost averaging if stock prices rise?

• You will have to invest more money.

• You will miss out on dividends.

• You will buy at higher prices, increasing the average cost per share.

• You will incur higher transaction costs.

In the hypothetical example comparing two investors over 20 years, which strategy came out slightly ahead?

• Neither, they performed equally

• Both strategies lost money

• Lump-sum investing

• Dollar-cost averaging

According to historical analysis, what is the best action for long-term investors?

• Avoid investing in the stock market.

• Invest as soon as possible, regardless of market conditions.

• Wait for the market to drop before investing.

• Invest only in bonds.

What is a benefit of dollar-cost averaging for investors who fear short-term market drops?

• It guarantees a profit.

• It allows for risk management on entry.

• It eliminates all transaction costs.

• It ensures the highest possible returns.