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Dollar-cost-averaging and diversifying your portfolio are orthogonal to active/passive investing. (Though arguably DCA is a bit more on the passive side, as it
by kspaans 9y ago
Dollar-cost-averaging and diversifying your portfolio are orthogonal to active/passive investing. (Though arguably DCA is a bit more on the passive side, as it avoids trying to time the market.)
- warrenm 9y agoDCA and diversification are more-or-less the bread-and-butter of routine buy-ins to ETFs, MFs, etc You rely on the fund to be diversified within its target sectors, and you diversify by picking multiple different funds across different sectors.
- nemo44x 9y agoExactaly right. And in part of the DCA strategy as you described I also DCA into a cash fund (liquidity fund) that can be used at a time I judge opportune. That is if there's a housing crash, I'll have a hard asset I can use to jump into that opportunity. Of if there's a market correction or crash, I'd be able to use a portion of that cash to buy low. It's not quite timing the market because the portion going into cash is scaled accordingly to how much is going into other types of funds and also has the benefit of being used if there's an emergency that requires a decent amount of liquidity. Having it all in liquidity would be a poor choice. Cash should only be a part of the overall strategy.