The Dollar Cost Averaging, Lump Sum, and Value Averaging Strategies in Mutual Fund Investments

  • Muhammad Miftahudin Zein Universitas Pendidikan Nasional, Indonesia (ID)
  • Gede Sri Darma Universitas Pendidikan Nasional, Indonesia (ID)
Keywords: Mutual fund, Investment DCA, Lump sum, Value averaging

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Abstract

Investment strategy and portfolio management are crucial considerations when investing in mutual funds. This research aims to analyze the effectiveness of achieving optimal returns by simulating dollar cost averaging, lump sum, and value averaging approaches. This analysis is conducted about the performance of a mutual fund portfolio, utilizing the Sharpe and Treynor methods. The research sample employs a purposive sampling technique, selecting the top 5 mutual funds in terms of performance, managed by different investment managers in the year 2022. Simulations are being conducted over three specific periods. In addition to mutual funds, a comparative analysis was conducted involving the Jakarta Composite Index (JCI) and 10-year government bond yields (SUN). The simulation results on equity funds for the three periods indicate that the Lump Sum investment method outperforms dollar cost averaging and value averaging, particularly over 6 years. This finding is further corroborated by the Kruskal-Wallis test, which highlights a significant variance in return performance. The results of the Sharpe and Treynor investment methods exhibit significant differences, as confirmed by the Mann-Whitney test. Lastly, regarding benchmark comparisons, the performance of equity funds surpasses that of the benchmark.



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Published
2023-10-05
Section
Articles
How to Cite
Zein, M. M., & Darma, G. S. (2023). The Dollar Cost Averaging, Lump Sum, and Value Averaging Strategies in Mutual Fund Investments. Quantitative Economics and Management Studies, 4(6), 1123-1140. https://doi.org/10.35877/454RI.qems2068