Warren Buffett Just Called Dollar-Cost Averaging "the Dumbest Thing in the World." But There's 1 Key Exception.
Not every investor should copy what Warren Buffett does.
Many financial experts tout dollar-cost averaging as a smart way to invest your money in the stock market. Warren Buffett disagrees, at least in some cases.
Dollar-cost averaging is a strategy in which you take a set amount of cash and invest it in securities on a periodic basis. It's often advised for investors sitting on a lump sum of cash who want to minimize their risk of paying too much for a stock.
There's no investor sitting on more cash than Warren Buffett right now. Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) ended the first quarter with more than $348 billion in cash and Treasury bills. But Buffett has been fine stacking cash and waiting for an opportunity in the market. At Berkshire's shareholder meeting this year, he even went so far as to say if he was forced to invest $40 billion or $50 billion per year from the cash pile and Berkshire's operating cash flow, "that would be the dumbest thing in the world to invest in that manner." He's not going to dollar-cost-average into the market with Berkshire's money.
