4 ms·
This is the same as statistically from loading a 401k out performs DCA throughout the year. Sure this year sucks, but if only 1-2 years out of 8 perform worse,
by bushbaba 4y ago
This is the same as statistically from loading a 401k out performs DCA throughout the year.
Sure this year sucks, but if only 1-2 years out of 8 perform worse, BUT 6-7 years you perform better. Then holistically you’re still better off.
When you invest look at the long term not short term.
- bumby 4y agoIsn't this dependent on timing and isn't part of the point of DCA to mitigate timing risks? E.g., If I loaded my 401k just before the bottom fell out of the market, you need a much higher proportion of good years to dig out from that hole. With DCA, you would have a shallower hole to climb out of. (Possible I misinterpreting what you meant, or that I am just not financially saavy enough to chime in)
- UncleMeat 4y agoBut on average the market goes up. You can lose with lump sum investment as early as possible. But you will be more likely to lose by waiting and only slowly purchasing in. The value of DCA is in emotional regulation since it softens swings at the cost of reduced expected value.
- bumby 4y agoDoesn’t this ignore the asymmetry in risk? The colloquialism is that a bull climbs the stairs and a bear jumps out the window. Implying there’s much more downside risk to bad timing than upside potential. Is there work on a risk-based comparison between the two?