Warren Buffett criticizes dollar-cost averaging, recommends keeping cash on sidelines.

From Yahoo Finance: 2025-05-30 03:55:00

Dollar-cost averaging is a popular investment strategy, but Warren Buffett believes in keeping cash on the sidelines to outperform the S&P 500. While he avoids dollar-cost averaging with Berkshire’s money, he acknowledges its benefits for specific investors. Different investment approaches, such as trading, speculating, buy-and-hold, and passive investing, offer various tactics to win in the market.

Buffett’s success lies in buy-and-hold investing, with Berkshire Hathaway’s returns nearly double the S&P 500 since 1965. Patiently waiting for opportunities, Buffett uses cash reserves to capitalize on high-upside investments. Despite valuations and cash accumulation, piling up cash now may be wise.

While dollar-cost averaging is suitable for some, passive investors may fare better fully investing in index funds immediately. The value of lump-sum investments generally outweighs dollar-cost averaging, as stocks tend to increase over time. Failure to understand the game being played can lead to underperformance, emphasizing the importance of using different tactics for success.



Read more at Yahoo Finance: Warren Buffett Just Called Dollar-Cost Averaging “the Dumbest Thing in the World.” But There’s 1 Key Exception.