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Good point, but how about for retirement portfolios? I'm trying to point out the irrationality of it - after all, I don't think people desist from liquidating
by tunesmith 4y ago
Good point, but how about for retirement portfolios?
I'm trying to point out the irrationality of it - after all, I don't think people desist from liquidating only for tax/fee reasons. "I would sell everything today and DCA back in over the next year if not for those pesky taxes and fees! (shakes fist at sky)"
- andrewf 4y agoHaving thought about it a bit more - I'm not sure what motivation I'd have to sell then immediately DCA back in, my position would end up in the same place! If at the beginning of 2022, I'd had a crystal ball saying "stocks will crash in March then rebound in December", then I have a motivation: I do want to switch to a stock-light position, hold that for a while, then move back. In that situation I'd be inclined to DCA on the way out in January, as well as DCA back in during December. I want to reduce variance more than I want to increase the expected value.
- tunesmith 4y agoSo that's why I think it's a good argument for lump-summing a windfall rather than DCA-ing a windfall.