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Advisor Insights

The Case for Dollar-Cost Averaging

Some argue that lump-sum investing leads to better outcomes over time, but dollar-cost averaging is superior for prudent investors managing risk.

More than 20 years ago, I began to write Index Mutual Funds: Profiting From an Investment Revolution (Namborn, 1998). As far as I know, this was the first book (or among the first) to be published extolling the virtues of passive investment strategies. With a foreword by Jack Bogle, it foretold the prodigious rise of index mutual funds.

My other book, The Prudent Investor Act: A Guide to Understanding (Namborn, 2002), followed. It was written to set forth the legal and academic case for the use of index funds and other forms of passive investing. In 23 pages, the 1994 Uniform Prudent Investor Act and its supporting commentary draws upon and codifies the essential principles of prudence laid down by the 300-plus page 1992 Restatement (Third) of Trusts (Restatement). Together, the Restatement and the UPIA define the standards of modern prudent fiduciary investing.

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