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DCA assumes a large lump sum to invest, otherwise it’s simply a regular investment plan often linked to when you get your pay check. If you have a lump sum to

DCA assumes a large lump sum to invest, otherwise it’s simply a regular investment plan often linked to when you get your pay check. If you have a lump sum to invest, DCA is simply a way to reduce variance often at the cost of higher transaction fees. I don’t understand why DCA is touted as anything special, if you have a long term outlook and no specific market knowledge just buying in one lump sum probably would have better EV than DCA.

throw0101a 7y ago
Yes, DCA is technically breaking up large sum; compared to periodic payments: * https://www.investopedia.com/terms/p/periodic-payment-plan.asp https://www.investopedia.com/terms/p/periodic-payment-plan.a... * https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusion https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusio... A good number of studies have shown that putting in a lump sum all-at-once gives better results most of the time. The problem arises when people 'lose their nerve' when they read headlines about the market tanking, or recessions, or whatever. Market timing--trying to get out when things go down, and in again when they're up--is something that many people try to do: * https://www.investopedia.com/articles/stocks/08/passive-active-investing.asp https://www.investopedia.com/articles/stocks/08/passive-acti... There are all sorts of articles about "technical indicators" that one can use as a DIY investor to get out during bear markets. Or you can pay other people for their "expertise" by buying their actively managed funds. The "DCA" comes in where people set aside money to invest, but do not issue a Buy because it's the 'wrong time' to invest: so the cash ends up sitting around, doing nothing much. But the article is arguing that trying to time the market (by buying the dip) is a fool's errand, and simply putting away a little every month into index funds (S&P, Russell) is the best thing most people can do.

throw0101a 7y ago

Yes, DCA is technically breaking up large sum; compared to periodic payments: * https://www.investopedia.com/terms/p/periodic-payment-plan.asp https://www.investopedia.com/terms/p/periodic-payment-plan.a... * https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusion https://en.wikipedia.org/wiki/Dollar_cost_averaging#Confusio... A good number of studies have shown that putting in a lump sum all-at-once gives better results most of the time. The problem arises when people 'lose their nerve' when they read headlines about the market tanking, or recessions, or whatever. Market timing--trying to get out when things go down, and in again when they're up--is something that many people try to do: * https://www.investopedia.com/articles/stocks/08/passive-active-investing.asp https://www.investopedia.com/articles/stocks/08/passive-acti... There are all sorts of articles about "technical indicators" that one can use as a DIY investor to get out during bear markets. Or you can pay other people for their "expertise" by buying their actively managed funds. The "DCA" comes in where people set aside money to invest, but do not issue a Buy because it's the 'wrong time' to invest: so the cash ends up sitting around, doing nothing much. But the article is arguing that trying to time the market (by buying the dip) is a fool's errand, and simply putting away a little every month into index funds (S&P, Russell) is the best thing most people can do.