3 ms·

Another problem with DCA is that it's a classic case of "timing the market". If, over the course of those 3 months, the value of the asset you're purchasing con

Another problem with DCA is that it's a classic case of "timing the market". If, over the course of those 3 months, the value of the asset you're purchasing consistently increases, you'll 'lose' money in the sense that your dollar will have less and less purchasing power toward the end of the period. There's a good discussion of this strategy on the Bogleheads wiki: https://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar_cost_averaging_versus_lump_sum https://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar... tl;dr: If you think the market will continue to go up in the short term, lump sum will always beat DCA. A better rule, however, is: do not try to time the market. Just invest when you can.

yamaneko 9y ago
Thank you, this is a great insight. > A better rule, however, is: do not try to time the market. Just invest when you can. I'm not sure if I understood this one correctly. Is it like, instead of trying to find the best time to invest, like waiting for something huge to happen, just invest every now and then when you are able to do it. Is that it?
- brndnmtthws 9y ago
  That's right. If you have $100 sitting in your chequeing account to invest, better to invest it now. Most people get paid biweekly or twice per month, so it would make sense to just invest when you get paid.
  - rothbardrand 9y ago
    Which means, taking say $100 out of each paycheck and investing all of it on that day. You're not timing the market then, the money wasn't available prior to that. You're not paying attention to the price, you're just getting the price on that day. This is what dollar cost averaging usually means... assuming prior money was already invested. But when you have a lump sum, instead of putting it all in on that exact day you can DCA over a short period of time, like 2-5 days or 3 weeks. This is basically averaging over that period which is better than the chance of just happening to pick the wrong day to buy.
cvsh 9y ago
>A better rule, however, is: do not try to time the market. Just invest when you can. Well, that rule assumes two things: 1. That you're investing for the long term (i.e. retirement), and more importantly, 2. That you're investing in the stock market, which has a very long track record of going up more than it goes down, such that it always goes up over the long term. That second one, in particular, is much more of an open question when it comes to BTC.
3pt14159 9y ago
Yeah I prefer my way: Invest mostly in things that you would double your investment if they halved in price but that you think that that outcome is unlikely. That way if it halves in price, you get 3x the quantity, but you don't really miss out on a short term bull run because you're in for a significant amount.

yamaneko 9y ago

Thank you, this is a great insight. > A better rule, however, is: do not try to time the market. Just invest when you can. I'm not sure if I understood this one correctly. Is it like, instead of trying to find the best time to invest, like waiting for something huge to happen, just invest every now and then when you are able to do it. Is that it?

brndnmtthws 9y ago
That's right. If you have $100 sitting in your chequeing account to invest, better to invest it now. Most people get paid biweekly or twice per month, so it would make sense to just invest when you get paid.
- rothbardrand 9y ago
  Which means, taking say $100 out of each paycheck and investing all of it on that day. You're not timing the market then, the money wasn't available prior to that. You're not paying attention to the price, you're just getting the price on that day. This is what dollar cost averaging usually means... assuming prior money was already invested. But when you have a lump sum, instead of putting it all in on that exact day you can DCA over a short period of time, like 2-5 days or 3 weeks. This is basically averaging over that period which is better than the chance of just happening to pick the wrong day to buy.

cvsh 9y ago

>A better rule, however, is: do not try to time the market. Just invest when you can. Well, that rule assumes two things: 1. That you're investing for the long term (i.e. retirement), and more importantly, 2. That you're investing in the stock market, which has a very long track record of going up more than it goes down, such that it always goes up over the long term. That second one, in particular, is much more of an open question when it comes to BTC.

3pt14159 9y ago

Yeah I prefer my way: Invest mostly in things that you would double your investment if they halved in price but that you think that that outcome is unlikely. That way if it halves in price, you get 3x the quantity, but you don't really miss out on a short term bull run because you're in for a significant amount.