Understand how your money grows over time with compound interest. Compare dollar-cost averaging (regular monthly investments) versus lump sum investing.
JL Collins recommends VTSAX (Vanguard Total Stock Market Index Fund), which has historically returned about 8-10% annually (nominal) or roughly 7% after inflation. Time in the market matters more than timing the market.
JL Collins recommends VTSAX
Vanguard Total Stock Market Index Fund (VTSAX) covers the entire U.S. stock market via the CRSP US Total Market Index. Historical average return: ~10% nominal, ~7% inflation-adjusted (1926-2023). Current expense ratio: 0.04%.
VTSAX historical nominal avg: ~10%. Use 7% for inflation-adjusted.
Investing $500/month consistently over 30 years, starting with $10,000.
Lump Sum vs. DCA Research
A 2012 Vanguard study found that lump sum investing outperformed dollar-cost averaging approximately two-thirds of the time across U.S., U.K., and Australian markets. However, DCA reduces regret risk and is more practical for those investing from regular paychecks. As JL Collins says: "The best portfolio is the one you'll actually stick with."