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> 2/ You get to build a blended purchase price which is less dependent on the circumstances of a particular moment in time. This is essentially Dollar Cost Ave
by c0restraint 7y ago
> 2/ You get to build a blended purchase price which is less dependent on the circumstances of a particular moment in time.
This is essentially Dollar Cost Averaging... which is a recommended approach when you psychologically fear the risk of lump sum investments (though, lump sum investments are expected to have a higher return than DCA, at least in the case of index fund investing)
https://en.wikipedia.org/wiki/Dollar_cost_averaging https://en.wikipedia.org/wiki/Dollar_cost_averaging
- breischl 7y agoThe underlying logic for Lump Sum in an index is that the index is tracking the broader economy, which "always" goes up over the long haul. That same logic doesn't apply for a single company, where idiosyncratic risk will quite likely swamp the effects of the slowly rising tide of the broader economy. I would guess you probably get better valuations in the early rounds, but have less risk of loss in the later rounds. If nothing else, survivorship bias is playing in your favor for the later rounds (ie, the company has at least survived long enough to reach a Series B, C, D, etc round).
- beaner 7y agoI don't think this is always true. You could believe that something like Bitcoin is a good investment over a 10-year term, but recognize that it's volatile in the short-term, and so want to dollar-cost-average for that reason, regardless of what you think the broader economy might do. Some might even see it as a hedge against the rest of the economy.