Comment by IshKebab
6 months ago
So what you're saying is you avoid timing the market (which doesn't work) by timing when you buy shares? What?
6 months ago
So what you're saying is you avoid timing the market (which doesn't work) by timing when you buy shares? What?
You buy at a regular cadence, and sometimes it's low and others it's high, but on average you do OK.
No. You invest the same amount of money at a regular cadence throughout the year. The end result is that you obtain less shares when the price is high, and more shares when the price is low. It's explicitly not timing the market.
It's implicitly timing the market. If you have all the money available at the beginning of the year a better strategy is to just invest everything asap.
If you get the money monthly (e.g. from salary) then that's just normal investing and you don't have a choice anyway.
If you think that is some clever strategy then honestly you probably should get professional advice because you have some fundamental misunderstandings of the stock market.
Heh, I totally agree with you.
I don't know hoe many times I've explained people the given strategy is not what researchers mean when they compare lump sum investing (LSI, a.k.a. converting all cash you have available for investing into equities) and dollar-cost averaging (DCA, a.k.a. splitting the available cash into equal parts and slowly converting the cash into equities at a regular pace.)
What that strategy is is just a regular (e.g. monthly) series of lump sum investments every time cash comes available (e.g. when salary comes in), that people tend to confuse with a DCA strategy.
Having said that: one LSI investment every month is a great strategy that historically does better than any DCA strategy.
ETA:
Relevant research:
- Vanguard Research's Dollar-cost Averaging is Just Taking Risk Later: https://www.passiveinvestingaustralia.com/wp-content/uploads... - PWL Capital / Ben Felix's Dollar Cost Averaging v.s. Lump Sum Investing: https://pwlcapital.com/wp-content/uploads/2024/08/Dollar-Cos...