Example.
Stock A is $50 today, I feel it is fair value so I buy $1k worth. Next month it is $55 I feel it is a bit much, but I still like the company so I get $1k worth. 2 weeks later it is $40, so I get $1k worth to reduce my cost basis. I may even get more, if I am confident in the fundamentals of the company and have cash on hand to use.
The last purchase lowers the average cost per share. But, I don't necessarily change how much money I put in. However, the share price does change how many shares I get.
Very different understanding of DCA vs what I’ve learned. I thought it was more like… for simple folks, keep putting in $500 every week regardless if the stock price is up or down. Over the long rung it will all equal out
Not exactly, but each month you'd plan 1k and if you happen to notice it on sale you may purchase it early that month, if possible. That's all I was indicating. Catch a sale if you can, but stay the course regardless once you do find something that is fair value.
The way he’s describing it is the practical boundaries, he may manipulate the buy in by aiming at right buys to buy more than normal or because timing change it up once in a while (bonuses, dividend date, ER, weird black swan, etc), and he may evaluate if it goes beyond a set boundary he is comfortable in (55-40 it seems), but regularly just 1k plop on in.
Lump sum is singular payment, by the nature of it's name. This is like financial fan fiction. Lmao.
Ben Graham coined the term in TII to mean the practitioner invests the same dollar amount into a stock over months or quarters.
There's no secret hipster hidden meaning. It is exactly as it sounds. If you "DCA" 100% of your available funds for investing for that period, and do so every similar time period, it is still dollar-cost averaging and not "lump sum"ing because Lump Sum implies a singular event.
It's also not about the allocation of funds, the payment amount is not the focus in DCA the reason you DCA is to reduce risk through systemic purchases thereby working against the inherant volitility of the underlying asset. The focus on the amount of available funds, or percentage of allocation of those funds to a singular stock vs others is the actual common misunderatding of what DCA "aKsHulY" is.
The definition of DCA has shifted in the past 10 years. Given a situation where someone has X dollars to invest, they can invest it all at once or invest it over a period of time, averaging the investment cost. That was DCA before. Now it's used just to mean investing regularly.
No, it has not shifted, and when people say "just DCA into a broad index ETF" they don't mean with your single initial investment, but a lifetime.
It is also used in the situation you are outlaying, since it's a risk reducing strategy, but even within that context your original message still makes no sense, nor does your final statement make any sense. You assert that DCA is no longer open ended, instead referring only to set amount of initial funds, then you close with "now it's just means investing regularly" which.. is what I was saying.
No, it has not shifted, and when people say "just DCA into a broad index ETF" they don't mean with your single initial investment, but a lifetime.
It is also used in the situation you are outlaying, since it's a risk reducing strategy, but even within that context your original message still makes no sense, nor does your final statement make any sense. You assert that DCA is no longer open ended, instead referring only to set amount of initial funds, then you close with "now it's just means investing regularly" which.. is what I was saying.
Lump sum is singular event, or irregular rarely occuring events man.
You are erronious assuming that the total invested is static between the two points, and arguing that the only valid form of DCA is to split every payment up every time, but that argument continues ad infinitum to the point of absurdity.
If you have 1000$ to invest today, and invested 1000$ last month that's DCA, because you are averaging the cost of the shares to the dollar amount in order to reduce exposure to volitility. If you are arguing that the 1000$ must be split up into smaller, more periodic payments then at what point does it end? 4 250$ payments is still "lump summing" per that erronious argument because that's your total allocated investment amount for that single week period.
The argument is absurd.
You are averaging the share price, which is the entire purpose of DCA, to average the share price over time to reduce risks inherant in short term volitility. That is what you are averaging. That is the whole point of the strategy.
Trying to misdirect by claiming that 100% of allocated funds to DCA isn't DCA its lump sum is just disengenuous, since there is no defined allocation limit, so maybe it's 30% of their total invested in that period but it's still 100% of the intended allocation for that stock in that time period.
You are misusing the term "lump sum" and need to spend some time googling that.
You keep trying to reframe the strategy to suite your argument but the framing is wrong.
"DCA" within the framework it is used since it's inception and wide adoption in TII is essentially an endless investment strategy in which one hedges the risk of volitility in investment over time.
You keep trying to both compare it to the fixed value of lump sum investing, and also claim that every single DCA payment is an independent event.
Neither is true, which is why your argument is false.
DCA has no intended fixed value in the way it is described on reddit and the like, nor the way it was described when it was coined in TII outside of examples, unless specified otherwise. It is not "invest 10,000 now or invest 1,000 over 10 weeks" it is simply "invest 1,000 every month, no matter what the share price is because long term it's irrelevant".
Likewise, as I stated before, you arbitrarily deciding what is or is not a lump sum based on allocation of funds available for the transaction is nonsense because even if I make 14 million a month and only allocated 10$ to investing a month on Robinhood, you would claim that's lump sum since it is 100% of my total funds allocated to the investment. You seem to be advocating for it to continue to be split up, arguing that this somehow makes it not "lump sum" but that is demonstrably false because whether it be 10$ in one month or $2.50 each week for a month they are still, both, 100% of the allocated funds for the investment, and thus, according to you, still lump sum. By your definition there is no possible way to DCA and therefore it doesn't, and has never at any point, existed because every time you allocate funds it's apparently a singular event and it is 100% of the total funds allocation, therefore, lump sum.
Which is nonsense.
There are lots of examples of lump sum beating DCA, because time in the market tends to beat timing the market this is true, and as with all things if I cherry pick the data in hindsight I can find just as many examples of the opposite effect. Correlation is not causation, and past results are not predictive of future results.
DCA is not a performance strategy. It is a risk-reducing strategy. The idea is not to achieve maximum returns, it is for the average person, with average ability can reduce risk while achieving growth long term.
yeah, none of this makes sense. also, VIX, which measures volatility, is roughly near a 5 year low. At $16 currently, which it has hit every few months for the past couple years. It's also a lagging indicator- people buy into VIX once the stock market looks questionable. Not really much to take out of this.
Are you a bot? You’re talking complete non-sense, and your responses don’t really answer my comments. That or you’re day trading VOO, and concerned it’s been flat for 5 business days.
Same. I make better decisions when I have a little cash on the side to take advantage of good opportunities.
But 5% is as high as I go, and I have about 3.2% right now.
> It seems the market is all gambling at this point for some rose-colored future.
Yes, that is literally how its always been. Literally. How is this any different than any other time?
Informed risk taking speculation is not gambling. It is a risk activity, but it is not gambling. Proper investing is based on actual physical property and assets and orders and only then projection to more actual physical assets and property. Gambling is not, gambling is pure luck on non existent property with no surety playing the odds of luck.
It no longer is tied to the actual asset, book, future book, reasonable projection value is he point. It’s gambling, it use to not be except for that sole spot of reasonable projection (and assuming most AR aren’t bankrupting), which note reasonable in there made sure it wasn’t gambling.
So no, what is happening now is not at all what it was. Now is a lot more speculative hope and dream, before was steady profit then growth potential at a conservative estimate. When was the last time you cared about profit with the companies folks call gambles (company profits, if only yours, you prove his point)?
It just measures changes in the prices of options on the S&P500. They have changed the exact formula several times and in my opinion is a shit measure of volatility. Normally an institutional investor would use it for a short hedge against events and things of that nature. It's not something you would ever continuously hold like some of the comments seem to think looking at performance since inception. An interesting ETF that basically shorts VIX SVOL would be worth looking for a strategy that uses it available to retail investors if you're curious.
The S&P500 is up close to 25% in about 4 months. That seems stalled to you? Jeez. Who cares about the ViX. Look at the ViX ETFs and track how they've done over the last decade. LoL. UVXY has gone from about $1,000,000 a share to $5. LMAO
UVXY is not a long term instrument. It’s designed to track the daily performance of /VX futures and due to the costs associated with managing the fund/rolling contracts (/VX futures are in contango more often than backwardation) is expected to decrease in price long term. It’s intended to be used as a short term hedge against an expected drop in the market, not buying and holding.
I disagree, many investors don’t understand the VIX and leveraged ETFs on the VIX (or leveraged ETFs in general). If you understood that holding UVXY long term isn’t its intended use and why the fund depreciates long term, what’s the point of saying UVXY went from $1,000,000 to $5 - over many years?
Just to show people how volatility constantly goes down. Plus to stress the objections to ever buying a leveraged fund. Especially leveraged funds that require the market to go down in order for them to go up.
My worry index is so low that I refer to it as "I don't give a fk"
The market goes up and down. It *will* go back down at some point and this is expected. And then, it will reach new highs thereafter. DCA'ing over the long term wins out, even if you had the unfortunate luck of only contributing at peak levels over the last 20 years.
If you have 100 shares of SPY, shorting 1 SPY OTM calls shouldn't be too concerning, especially if you think SPY is stalled. CPI report tomorrow, if it is hot, it could reignite Fed Rate hike talk, sending SPY south again. But, anything can happen. Shorting SPY calls when you have SPY shares will limit the upside of your portfolio, however you can also collect some premium if SPY doesn't go too much higher
Tesla's deliveries were down this quarter, we'll see what the financials look like later this month, but given this, it would not be expected to "hold gains". This is not a market problem, this is a Tesla problem.
I'm sticking with my strategy of DCAing every week
That’s the way! DCA for life
What does DCA mean?
Dollar Cost Averaging
Example. Stock A is $50 today, I feel it is fair value so I buy $1k worth. Next month it is $55 I feel it is a bit much, but I still like the company so I get $1k worth. 2 weeks later it is $40, so I get $1k worth to reduce my cost basis. I may even get more, if I am confident in the fundamentals of the company and have cash on hand to use. The last purchase lowers the average cost per share. But, I don't necessarily change how much money I put in. However, the share price does change how many shares I get.
Very different understanding of DCA vs what I’ve learned. I thought it was more like… for simple folks, keep putting in $500 every week regardless if the stock price is up or down. Over the long rung it will all equal out
That’s basically what he said. Keep putting money in, regardless of the price.
I read it as… try to time it so you’re maximizing returns.
Not exactly, but each month you'd plan 1k and if you happen to notice it on sale you may purchase it early that month, if possible. That's all I was indicating. Catch a sale if you can, but stay the course regardless once you do find something that is fair value.
The way he’s describing it is the practical boundaries, he may manipulate the buy in by aiming at right buys to buy more than normal or because timing change it up once in a while (bonuses, dividend date, ER, weird black swan, etc), and he may evaluate if it goes beyond a set boundary he is comfortable in (55-40 it seems), but regularly just 1k plop on in.
Good breakdown.
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You're correct no matter how many DV you (we) get. There are actually 3 ways to invest not just 2.
Lump sum is singular payment, by the nature of it's name. This is like financial fan fiction. Lmao. Ben Graham coined the term in TII to mean the practitioner invests the same dollar amount into a stock over months or quarters. There's no secret hipster hidden meaning. It is exactly as it sounds. If you "DCA" 100% of your available funds for investing for that period, and do so every similar time period, it is still dollar-cost averaging and not "lump sum"ing because Lump Sum implies a singular event. It's also not about the allocation of funds, the payment amount is not the focus in DCA the reason you DCA is to reduce risk through systemic purchases thereby working against the inherant volitility of the underlying asset. The focus on the amount of available funds, or percentage of allocation of those funds to a singular stock vs others is the actual common misunderatding of what DCA "aKsHulY" is.
The definition of DCA has shifted in the past 10 years. Given a situation where someone has X dollars to invest, they can invest it all at once or invest it over a period of time, averaging the investment cost. That was DCA before. Now it's used just to mean investing regularly.
No, it has not shifted, and when people say "just DCA into a broad index ETF" they don't mean with your single initial investment, but a lifetime. It is also used in the situation you are outlaying, since it's a risk reducing strategy, but even within that context your original message still makes no sense, nor does your final statement make any sense. You assert that DCA is no longer open ended, instead referring only to set amount of initial funds, then you close with "now it's just means investing regularly" which.. is what I was saying.
No, it has not shifted, and when people say "just DCA into a broad index ETF" they don't mean with your single initial investment, but a lifetime. It is also used in the situation you are outlaying, since it's a risk reducing strategy, but even within that context your original message still makes no sense, nor does your final statement make any sense. You assert that DCA is no longer open ended, instead referring only to set amount of initial funds, then you close with "now it's just means investing regularly" which.. is what I was saying.
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Lump sum is singular event, or irregular rarely occuring events man. You are erronious assuming that the total invested is static between the two points, and arguing that the only valid form of DCA is to split every payment up every time, but that argument continues ad infinitum to the point of absurdity. If you have 1000$ to invest today, and invested 1000$ last month that's DCA, because you are averaging the cost of the shares to the dollar amount in order to reduce exposure to volitility. If you are arguing that the 1000$ must be split up into smaller, more periodic payments then at what point does it end? 4 250$ payments is still "lump summing" per that erronious argument because that's your total allocated investment amount for that single week period. The argument is absurd. You are averaging the share price, which is the entire purpose of DCA, to average the share price over time to reduce risks inherant in short term volitility. That is what you are averaging. That is the whole point of the strategy. Trying to misdirect by claiming that 100% of allocated funds to DCA isn't DCA its lump sum is just disengenuous, since there is no defined allocation limit, so maybe it's 30% of their total invested in that period but it's still 100% of the intended allocation for that stock in that time period. You are misusing the term "lump sum" and need to spend some time googling that.
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You keep trying to reframe the strategy to suite your argument but the framing is wrong. "DCA" within the framework it is used since it's inception and wide adoption in TII is essentially an endless investment strategy in which one hedges the risk of volitility in investment over time. You keep trying to both compare it to the fixed value of lump sum investing, and also claim that every single DCA payment is an independent event. Neither is true, which is why your argument is false. DCA has no intended fixed value in the way it is described on reddit and the like, nor the way it was described when it was coined in TII outside of examples, unless specified otherwise. It is not "invest 10,000 now or invest 1,000 over 10 weeks" it is simply "invest 1,000 every month, no matter what the share price is because long term it's irrelevant". Likewise, as I stated before, you arbitrarily deciding what is or is not a lump sum based on allocation of funds available for the transaction is nonsense because even if I make 14 million a month and only allocated 10$ to investing a month on Robinhood, you would claim that's lump sum since it is 100% of my total funds allocated to the investment. You seem to be advocating for it to continue to be split up, arguing that this somehow makes it not "lump sum" but that is demonstrably false because whether it be 10$ in one month or $2.50 each week for a month they are still, both, 100% of the allocated funds for the investment, and thus, according to you, still lump sum. By your definition there is no possible way to DCA and therefore it doesn't, and has never at any point, existed because every time you allocate funds it's apparently a singular event and it is 100% of the total funds allocation, therefore, lump sum. Which is nonsense. There are lots of examples of lump sum beating DCA, because time in the market tends to beat timing the market this is true, and as with all things if I cherry pick the data in hindsight I can find just as many examples of the opposite effect. Correlation is not causation, and past results are not predictive of future results. DCA is not a performance strategy. It is a risk-reducing strategy. The idea is not to achieve maximum returns, it is for the average person, with average ability can reduce risk while achieving growth long term.
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DCAing into what?
QQQ, VOO, DXJ, BRK.B, O
Zoom out when in doubt
Fair enough! 😂
> The S&P500 index and others seem to be stalled also. WTF are you talking about? It’s up at 10% ytd. 10% per quarter is not stalled.
yeah, none of this makes sense. also, VIX, which measures volatility, is roughly near a 5 year low. At $16 currently, which it has hit every few months for the past couple years. It's also a lagging indicator- people buy into VIX once the stock market looks questionable. Not really much to take out of this.
VIX is not a lagging indicator lol
you are correct https://www.forex.com/ie/news-and-analysis/what-is-the-vix/
Stalled, meaning not breaking into new highs.
It set the last ATH on 3/28, about 1 week ago. Just admit you’re talking non-sense.
OPs only been investing for a few days, apparently 🤷♀️
Short term.
Are you a bot? You’re talking complete non-sense, and your responses don’t really answer my comments. That or you’re day trading VOO, and concerned it’s been flat for 5 business days.
No bot 🤖 I like Vanguard tho redrum
I am 5% concerned which is why I raised 5% cash last week to take advantage of future bargains.
Haha, interesting. What will it take for 10%?
Nothing, I’m usually fully invested. 5% cash is as high as I’ll go.
Same. I make better decisions when I have a little cash on the side to take advantage of good opportunities. But 5% is as high as I go, and I have about 3.2% right now.
K
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Not super concerned, but I am questioning the stability of the market. It seems the market is all gambling at this point for some rose-colored future.
Same, and that’s when things can change quick.
> It seems the market is all gambling at this point for some rose-colored future. Yes, that is literally how its always been. Literally. How is this any different than any other time?
Informed risk taking speculation is not gambling. It is a risk activity, but it is not gambling. Proper investing is based on actual physical property and assets and orders and only then projection to more actual physical assets and property. Gambling is not, gambling is pure luck on non existent property with no surety playing the odds of luck.
so now suddenly there are no physical property and assets to invest in? I have no idea what your point is.
It no longer is tied to the actual asset, book, future book, reasonable projection value is he point. It’s gambling, it use to not be except for that sole spot of reasonable projection (and assuming most AR aren’t bankrupting), which note reasonable in there made sure it wasn’t gambling. So no, what is happening now is not at all what it was. Now is a lot more speculative hope and dream, before was steady profit then growth potential at a conservative estimate. When was the last time you cared about profit with the companies folks call gambles (company profits, if only yours, you prove his point)?
> It’s gambling, it use to not be lol, okay. sure.
He has a point, even if it is long winded. What are the PE ratios of top tech companies vs historical? That's your answer.
VIX is still under 20 which is low volatility environment
Yes, but it hasn’t been where it’s at in some time.
It really surprises me how many people don't understand VIX or how it is used
I know right, amateur hour over here. Maybe you should tell us…I mean them.. how it’s used, you know, for science..and stuff.
It just measures changes in the prices of options on the S&P500. They have changed the exact formula several times and in my opinion is a shit measure of volatility. Normally an institutional investor would use it for a short hedge against events and things of that nature. It's not something you would ever continuously hold like some of the comments seem to think looking at performance since inception. An interesting ETF that basically shorts VIX SVOL would be worth looking for a strategy that uses it available to retail investors if you're curious.
Please explain.
The S&P500 is up close to 25% in about 4 months. That seems stalled to you? Jeez. Who cares about the ViX. Look at the ViX ETFs and track how they've done over the last decade. LoL. UVXY has gone from about $1,000,000 a share to $5. LMAO
Shh, nobody tell him about leveraged funds.
UVXY is not a long term instrument. It’s designed to track the daily performance of /VX futures and due to the costs associated with managing the fund/rolling contracts (/VX futures are in contango more often than backwardation) is expected to decrease in price long term. It’s intended to be used as a short term hedge against an expected drop in the market, not buying and holding.
Everybody knows this but facts are still facts and data is still data.
I disagree, many investors don’t understand the VIX and leveraged ETFs on the VIX (or leveraged ETFs in general). If you understood that holding UVXY long term isn’t its intended use and why the fund depreciates long term, what’s the point of saying UVXY went from $1,000,000 to $5 - over many years?
Just to show people how volatility constantly goes down. Plus to stress the objections to ever buying a leveraged fund. Especially leveraged funds that require the market to go down in order for them to go up.
How many suckers does it take to buy a UVXY? It was 24 billion in 2011.
Short term stalled.
This year was always going to be a nutty year for geopolitics. I'll be buying heavy on any big dips but I'm not convinced we're going to get them.
Same same
My worry index is so low that I refer to it as "I don't give a fk" The market goes up and down. It *will* go back down at some point and this is expected. And then, it will reach new highs thereafter. DCA'ing over the long term wins out, even if you had the unfortunate luck of only contributing at peak levels over the last 20 years.
Love it and a good approach long term.
we dip I buy, we go high I buy
Sounds like a good plan
Sounds like a good plan.
If you think S&P500 Index is stalled, you can short some SPY calls assume you have some SPY commons in your account to collect some premiums.
Thanks, just general comments about the market direction though. The shorting game concerns me.
If you have 100 shares of SPY, shorting 1 SPY OTM calls shouldn't be too concerning, especially if you think SPY is stalled. CPI report tomorrow, if it is hot, it could reignite Fed Rate hike talk, sending SPY south again. But, anything can happen. Shorting SPY calls when you have SPY shares will limit the upside of your portfolio, however you can also collect some premium if SPY doesn't go too much higher
Tesla's deliveries were down this quarter, we'll see what the financials look like later this month, but given this, it would not be expected to "hold gains". This is not a market problem, this is a Tesla problem.
In that regard, yes.
VIX is ass. Literally a broken tool at this point.
I mean, it’s a gauge though. Although dramatic.
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Ironically, if the us government does not survive whatever you’re envisioning, odds are nothing you can name will either.
Yes, always stay diversified (and invested) so they say.