Personal Investments • Lump Sum or DCA a large windfall

What if, after 12 months of DCA (when you now all in) the markets then pull back or correct?" In other words, in 12 months of DCA, you are exposed to the same risk, with the same amount of money, as you are today. One difference is that in 12 months the markets may have gone up (the odds are in favor of this) to the point where a pullback is (slightly?) less of a problem.

The part in bold is not correct.
You are exposed to the same risk after the DCA phase ends, but not before.
In fact, after the DCA phase ends, your cost basis is the weighted average of many purchases, whereas the cost basis with lump sum is a single price.

My point is, there is no logical reason to DCA. DCA is a small mistake in playing the odds, but the emphasis should be on the "small." There is no reason to think DCA will improve the odds of dodging a stray bullet.

Since profit (loss) is the difference between price of sale and price of purchase, it is evident that different price of purchase between LS and DCA can generate different outcomes even if eventually both players sell at the very same price.

Statistics: Posted by Thesaints — Sun Aug 18, 2024 8:52 pm — Replies 42 — Views 3797

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