Q. Having read your column for some time, we don't recall having seen any mention of dollar cost averaging. You also frequently recommend the Vanguard Balanced Index Fund for lump sum investing. Dollar cost averaging is one of the great benefits of monthly investment plans such as 401k, 403b plans. Academic research, however, supports the idea of lump sum commitments to equities rather than dollar cost averaging in. Research is a product of the head.
Investors also have hearts and stomachs.
That's why I suggest that anyone with a major sum to invest, such as a pension distribution, do it over a period of one to two years. I mention the Vanguard Balanced Index Fund because it is a great benchmark and a no-cost place to start. In addition, it's low cost regularly puts it near the top quartile of balanced funds. That makes it a very good bet for investors who want to keep their lives simple.