Is DCA or lump-sum investing better for you?

If you’ve only got a minute:

• If you are keen to start investing, a regular savings plan like DBS Invest-Saver and a robo-advisor like DBS digiPortfolio are assessable options for you.
• With DBS Invest-Saver, you are able to pick and choose your investments while benefitting from dollar-cost averaging.
• DBS digiPortfolio provides you with ready-made, quarterly rebalanced portfolios that’s curated by the DBS Investment Team.
• You can invest into DBS digiPortfolio via lump-sum contributions, or as a regular savings plan under DBS Invest-Saver.

Investing is an effective way to put your savings to work. It presents opportunities for you to preserve and build your wealth, ensuring that over time, the value of your hard-earned savings isn’t eroded by inflation.

While most already know this, it isn’t put into practice as frequently due to the inertia that people face when embarking on their investment journey. The reasons for this include having the fear of making investment mistakes, not having the time or know-how to monitor their investments, or simply not knowing where to start. 

If you are new to investing, as a rule of thumb, you should take note of your financial circumstances, investment goals, risk appetite and time horizon. Only then can you consider what investments are available to you.

There are 2 common investment approaches you can take. The first is lump-sum investing and the second is dollar-cost averaging.

Lump-sum vs dollar-cost averaging (DCA)

Lump-sum investing involves investing a larger sum of money into a particular investment at one go. This allows you to top-up your investment along the way if you have more cash on hand or see a market opportunity to do so.

This is a suitable approach for an individual who has sizeable savings available for investing. Common examples of such people are those who are in their mid-career or nearing retirement as they are more likely to be able to make larger, one-time investment purchases due to wealth being built up over time. Often times, such an individual would have less liabilities (for example, the home loans are likely to be paid up).

In contrast, a young PMET or first jobber is less likely to have the means to make large, lump-sum investments.

This is where dollar-cost averaging (DCA) comes in. This method of investing involves making smaller, regular investments over time. By buying in at multiple price points in regular intervals, you eventually “average out” the cost of investing over the long term.

This also helps to take the guesswork out of trying to invest at the right time (when the market is at a low).

While you can practice DCA manually, it requires an elevated level of monitoring and discipline. A regular savings plan (RSP) can help automate the process of DCA.

DBS Invest-Saver is an RSP that adopts a DCA strategy. This means you are setting aside a pre-determined amount of savings – starting from $100 per month – for investing.

The cash you set aside is then invested for you on a fixed day each month in diversified investment products. As at the time of writing, there are 5 ETFs, 31 unit trusts and 4 DBS digiPortfolios available through DBS Invest-Saver.

With this method of investing, you are able to accumulate your investments in a steady and progressive manner.

Read more: What to know about DCA

DBS Invest-Saver & DBS digiPortfolio

Robo-advisors, offer a low barrier to entry and diversification benefits, making them suitable for a wide range of investors (even the experienced ones!).

DBS digiPortfolio is a robo-advisor that allows you to invest in ready-made portfolios starting from $100. These portfolios are managed by a team of investment professionals at DBS, who are supported by algorithms so that your investment portfolio can survive through different economic scenarios. This gives you the best of both worlds.

You can choose to invest directly in DBS digiPortfolio as a lump-sum investment, or via an RSP like DBS Invest-Saver.

Learn more about: DBS Invest-Saver
Learn more about: DBS digiPortfolio

Investment fees

With any investment, the fees you incur can, to a certain extent, eat into your overall returns. As such, it is important to know the fee schedule of the investments you are undertaking – how and when they are charged.

As DBS Invest-Saver involves monthly contributions, there are monthly transaction fees charged each time a contribution is made. The amount is based on the underlying investment (if it is an ETF or unit trust). In other words, if you invest into a unit trust under DBS Invest-Saver, there is a 0.82% transaction fee charged every month on the amount of your investment.

Meanwhile, DBS digiPortfolio charges an annual management fee which goes towards the research, monitoring and rebalancing of the DBS digiPortfolio.

This means that if you choose to invest in digiPortfolio under DBS Invest-Saver, there will be no additional upfront transaction fees on top of the annual management fee.

Read more: Understanding investment fees

Flexibility for personalisation

As we progress through the different life stages, it is only natural that our investment goals, objectives, and risk tolerances will change over time. As such, there’s no one-size-fits-all portfolio that will cater perfectly to every individual. In light of this, it is helpful to have the option of customising your portfolio as necessary.

You can have full autonomy over your investment choices by making lump-sum investments into individual equities, ETFs or unit trusts.

If you prefer to invest using smaller, regular amounts, DBS Invest-Saver also offers you high flexibility for personalising your portfolio with the available choices of ETFs, unit trusts and DBS digiPortfolio options.

Whichever you prefer, remember to align your portfolio with your investment goals, preferences, and risk appetite.

Risk averse individuals can choose to pick up more fixed income ETFs/unit trusts and dividend-focused ETFs/unit trusts while those with higher risk appetite can allocate more funds into the Singapore equity ETF or Singapore-focused unit trusts.

You can also choose from an extensive list of unit trusts to gain exposure into your preferred markets (i.e. local, global) or industries (i.e. banks, property).

That said, this does come with a caveat. You will have need to be more hands-on when it comes to managing which individual ETFs or unit trusts to invest in as well as how much to allocate.

On the other hand, DBS digiPortfolio provides you with ready-made, quarterly rebalanced portfolios that’s handled by professionals.

While this leaves you with less flexibility to personalise your portfolio, if you are unsure of what to invest in, all you have to do is fill in a questionnaire covering your investment objective and risk appetite, among others. Suitable options will be listed for you.

Level of guidance

The main difference between stock picking to build your own portfolio and using DBS digiPortfolio is the level of guidance you have in your decision making.

If you are a savvy investor, you can customise your own portfolio with your own equity, ETF and/or unit trust picks without much guidance. You will also be familiar with your risk tolerance, preferred asset allocation and rebalancing strategy.

DBS digiPortfolio will better suit your needs if you prefer to let the professionals do the research and portfolio management for you. All you have to do is pick 1 of the 4 available portfolios based on the level of risk you are comfortable with and decide if you want to invest in it via a lump-sum contribution or through DBS Invest-Saver.

Each portfolio is carefully curated by the DBS investment team to ensure optimal asset allocation and portfolio resilience.

Strike while the iron is hot!

While employing the right investment solutions to kickstart your investment journey can seem like a daunting endeavour, don’t let this be a stumbling block for you.

If you feel that your choice doesn’t suit your changing needs, you can always make tweaks later on. If you have doubts on which option to take, you can speak to DBS Wealth Planning Managers, who are always on hand to explore your financial planning options with you.

The key is to start investing as early as possible, and embrace the virtues of discipline, time, and patience, so as to grow your wealth and reap the full benefits of compounding.

Read more: Discipline, time, and patience in investing

Investment Tip: Earn higher interest on your investments with a DBS Multiplier Account. Invest-Saver and digiPortfolio are now recognised as eligible transactions for investments, and contribute to your total monthly eligible transactions. Check out how DBS Multiplier makes it easier for you to multiply your money.

Ready to start?

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.

All investments come with risks and you can lose money on your investment. Invest only if you understand and can monitor your investment. Diversify your investments and avoid investing a large portion of your money in a single product issuer.

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