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Why would weekly deposits mitigate risk?
by omosubi 8y ago
Why would weekly deposits mitigate risk?
- sergiotapia 8y agoI read somewhere they used previous outcomes to simulate lump sum investments at the start, and weekly/monthly deposits. End result wasn't that much different - the lump sum did do better, but not significantly. The weekly/monthly deposits was smoother.
- AznHisoka 8y agoicedchai summed it above but the reason for this isn't to maximize return - it's psychological. If the market drops, you now can buy more at a cheaper price. If you spent it all, you probably would be tempted to cash it all out to cut your losses. of course, you shouldn't, but we're talking about our lizard brains here.
- TheDom 8y agoThe strategy is called dollar cost averaging: https://en.wikipedia.org/wiki/Dollar_cost_averaging https://en.wikipedia.org/wiki/Dollar_cost_averaging
- icedchai 8y agoIt’s mostly psychological. You dump 500k in and the market drops 10% next month, you’ll feel like crap. If you’re DCAing in you can put more in and feel like you’re taking advantage of the discount. Long term it doesn’t matter much.