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Putting hundreds of thousands of dollars into the stock market all at once can feel risky, especially when political headlines, international conflicts and unexpected events can send stocks sharply higher or lower.
That’s why personal finance expert Dave Ramsey told a “The Ramsey Show” listener considering a $350,000 investment that market volatility is inevitable because President Donald Trump is “going to do a Trump thing” at some point. The real question, Ramsey said, is whether investors can stay calm when it happens.
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The Math Favors A Lump-Sum Investment?
Gabriel wrote into the show saying that he and his family recently sold their home. Since they don’t expect to buy another property for four or five years, they were considering putting the money into the S&P 500 and other index funds. The question was whether to invest the entire amount at once or spread it out gradually through dollar-cost averaging.
“If you understand what you’re putting money into and you’ve looked at the track record of it, the S&P 500, the math would tell you to put it all in at once,” he said.
He explained that money invested immediately has more time to benefit from market growth. Using a hypothetical example, Ramsey said a $100,000 investment made at the beginning of a year in which the market gains 25% would grow to roughly $125,000. Someone investing that same amount gradually over 12 months would end up with significantly less because much of the money would spend part of the year sitting in cash.
Still, Ramsey acknowledged that investing everything at once can be emotionally difficult.
“The only reason a dollar cost average is if you’re emotionally not committed to this process,” he said, “and the first time Trump decides to bomb Iran and the market goes down, you freak out.”
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Ramsey warned that investors should expect periods of turbulence.
“He’s going to do a Trump thing. You can count on it,” Ramsey said. “I don’t know what the next one’s going to be, but there’s going to be a Trump thing. Sometimes it causes the market to go up. Sometimes it causes the market to go down.”
