3 ms·

DCA works, but isn't super important. If you win a lump sum, studies show that the best time to put it in the market is all of it right now, not trying to time

DCA works, but isn't super important. If you win a lump sum, studies show that the best time to put it in the market is all of it right now, not trying to time the market or DCAing it into the market. Of course, you could get unlucky, so that you're initially in the 2000->2013 style window, but you can't know that at the time. Of course, most of us do / should invest smaller amounts over time, just because that is what our earning profile is like.

throw0101b 4y ago
> Of course, you could get unlucky, so that you're initially in the 2000->2013 style window, but you can't know that at the time. 2000+ was only an issue for US-only, equity-only investors: if you were globally diversified you were fine. Even if you were US-only, but had at least 20% bonds, you were also fine: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
cdavid 4y ago
That somehow surprises me. Can you link such a study ?
- throw0101b 4y ago
  * https://ofdollarsanddata.com/dollar-cost-averaging-vs-lump-sum/ https://ofdollarsanddata.com/dollar-cost-averaging-vs-lump-s... * https://ofdollarsanddata.com/the-cost-of-waiting/ https://ofdollarsanddata.com/the-cost-of-waiting/ Author has a repo where he often shares the data/code used in generating analysis: * https://github.com/nmaggiulli/of-dollars-and-data https://github.com/nmaggiulli/of-dollars-and-data
- Quarrel 4y ago
  You received one good set of links, but I'm pretty sure I first read of it from a Meb Faber study that I'm not in a position to look up right now. He has done a lot of work on simplifying and making investable decent and straight forward strategies for long term investment.
- kikokikokiko 4y ago
  Ben Felix's channel ia a great place to find empirically based investing advice. All of his videos cite the papers where the information he spouts can be sourced. About lump sum investing, you can check this video: https://m.youtube.com/watch?v=X1qzuPRvsM0 https://m.youtube.com/watch?v=X1qzuPRvsM0 TLDW: just invest it all, right now, in value small caps.
  - rashkov 4y ago
    “Value small caps” is the consensus among Ben Felix viewers, but not really outside of that group as far as I know. He’s very convincing but I’m not sure I’d recommend everyone does that, compared with buy and hold S&P 500 or total market index.
kevinventullo 4y ago
To be fair, I think the claim is that the expected value of your return is maximized by dumping it all in today. However, I believe the variance of your return should go down as you spread out the investments, no?
lisper 4y ago
> you could get unlucky Which is the whole point of DCA. It makes it less likely to get unlucky. (It also makes it less likely to get lucky. DCA makes it more likely that you will simply regress to the mean.)
M3L0NM4N 4y ago
Most people don't win the lottery, they have an income they can continuously invest.

throw0101b 4y ago

> Of course, you could get unlucky, so that you're initially in the 2000->2013 style window, but you can't know that at the time. 2000+ was only an issue for US-only, equity-only investors: if you were globally diversified you were fine. Even if you were US-only, but had at least 20% bonds, you were also fine: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...

cdavid 4y ago

That somehow surprises me. Can you link such a study ?

throw0101b 4y ago
* https://ofdollarsanddata.com/dollar-cost-averaging-vs-lump-sum/ https://ofdollarsanddata.com/dollar-cost-averaging-vs-lump-s... * https://ofdollarsanddata.com/the-cost-of-waiting/ https://ofdollarsanddata.com/the-cost-of-waiting/ Author has a repo where he often shares the data/code used in generating analysis: * https://github.com/nmaggiulli/of-dollars-and-data https://github.com/nmaggiulli/of-dollars-and-data
Quarrel 4y ago
You received one good set of links, but I'm pretty sure I first read of it from a Meb Faber study that I'm not in a position to look up right now. He has done a lot of work on simplifying and making investable decent and straight forward strategies for long term investment.
kikokikokiko 4y ago
Ben Felix's channel ia a great place to find empirically based investing advice. All of his videos cite the papers where the information he spouts can be sourced. About lump sum investing, you can check this video: https://m.youtube.com/watch?v=X1qzuPRvsM0 https://m.youtube.com/watch?v=X1qzuPRvsM0 TLDW: just invest it all, right now, in value small caps.
- rashkov 4y ago
  “Value small caps” is the consensus among Ben Felix viewers, but not really outside of that group as far as I know. He’s very convincing but I’m not sure I’d recommend everyone does that, compared with buy and hold S&P 500 or total market index.

kevinventullo 4y ago

To be fair, I think the claim is that the expected value of your return is maximized by dumping it all in today. However, I believe the variance of your return should go down as you spread out the investments, no?

lisper 4y ago

> you could get unlucky Which is the whole point of DCA. It makes it less likely to get unlucky. (It also makes it less likely to get lucky. DCA makes it more likely that you will simply regress to the mean.)

M3L0NM4N 4y ago

Most people don't win the lottery, they have an income they can continuously invest.