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People (small investors) generally dollar cost average because they don't have the money to buy it in a lumpsum, so I don't really see the point here. You also

People (small investors) generally dollar cost average because they don't have the money to buy it in a lumpsum, so I don't really see the point here. You also do it because you're more likely to do it vs a lumpsum, it feels less painful. That is one of the reasons the advice exists. Not everyone has spare cash laying around.

function_seven 3y ago
Yup. And with DCA, a skittish investor has something they can point to when buying stocks in all market conditions. Instead of “oh, I should wait for the dip” you can view your automatic purchases as “buying fewer shares because they’re expensive”. Instead of “oh, the market’s crashing. I should wait for the bottom,” you can think, “I’ll just be buying more shares the cheaper they become” It’s not a strategy per se, but more of a reasoning to stay the course and make your static monthly contribution.
refurb 3y ago
Plenty of people come into windfalls, say from selling a home, selling company stock, a inheritance, a gift, etc. Clearly investing $400 of saving each month is not the person this article is talking about.
- partiallypro 3y ago
  I still don't see the point of the article. If a stock goes up in the long run obviously the sooner you invest the better your return will be. DCA exists for several reasons. For instance, big institutional investor might do it because it reduces volatility of making large purchases that could affect the price in the short run which undercuts their investment & purchase price. Small investors do it because they don't have the money to do lumpsums. People that get windfalls don't generally park the cash in a savings account, they'll put some in a CD, money market, or bonds as they decide what to invest in otherwise. The money isn't sitting around doing nothing. The premise of this relies on an idea that the money is doing nothing otherwise (though it's available). That is not the case in most circumstances, not just because the money is usually in a safer investment, but because most people don't have spare uninvested money laying around, as I said.

function_seven 3y ago

Yup. And with DCA, a skittish investor has something they can point to when buying stocks in all market conditions. Instead of “oh, I should wait for the dip” you can view your automatic purchases as “buying fewer shares because they’re expensive”. Instead of “oh, the market’s crashing. I should wait for the bottom,” you can think, “I’ll just be buying more shares the cheaper they become” It’s not a strategy per se, but more of a reasoning to stay the course and make your static monthly contribution.

refurb 3y ago

Plenty of people come into windfalls, say from selling a home, selling company stock, a inheritance, a gift, etc. Clearly investing $400 of saving each month is not the person this article is talking about.

partiallypro 3y ago
I still don't see the point of the article. If a stock goes up in the long run obviously the sooner you invest the better your return will be. DCA exists for several reasons. For instance, big institutional investor might do it because it reduces volatility of making large purchases that could affect the price in the short run which undercuts their investment & purchase price. Small investors do it because they don't have the money to do lumpsums. People that get windfalls don't generally park the cash in a savings account, they'll put some in a CD, money market, or bonds as they decide what to invest in otherwise. The money isn't sitting around doing nothing. The premise of this relies on an idea that the money is doing nothing otherwise (though it's available). That is not the case in most circumstances, not just because the money is usually in a safer investment, but because most people don't have spare uninvested money laying around, as I said.