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in other words dca is the most effective strategy for your average investor?
by shiredude95 4y ago
in other words dca is the most effective strategy for your average investor?
- buzzy_hacker 4y agoDCA only speaks to the cadence of investment and is often contrasted to (and underperforms) lump sum. The strategy as a whole could be summed up as investing in low cost diversified index funds.
- vikingerik 4y agoNo. Since the stock market goes up on average over time, it's always correct by expected value to invest sooner, rather than holding money back to DCA in installments. Intentionally doing DCA if you have a sum that you could invest sooner is trying to time the market. DCA is a useful side effect when you're investing regularly, but on average it does not beat investing sooner.
- scarmig 4y agoDCA should be thought of as a portfolio strategy that is X% in your nominal portfolio and 100-X% in dollars and gradually shifting to 100% your nominal portfolio. It's an attempt to hedge against negative equities early on, but there are better hedges, and if your risk aversion makes you not want 100% equities early on, you probably don't want 100% equities later on either.
- andrewf 4y agoOn average, sure, but what if you're worried about outcomes approaching the worst case (say 10th percentile)?
- avvt4avaw 4y agoNo. Invest everything that you can now (into low cost diversified index funds or ETFs) and then top it up regularly as you get more capital from whatever else it is you do to earn a living (e.g. a percentage of your salary every month, a percentage of your annual bonus, a percentage of the annual dividend from your business etc etc).