Dollar Cost Averaging

[Jluke]

Thanks to all for sharing your perspectives.

I know it was such a simple question, but it's good to see how others are handling their investment DCA outside of 401k.

I need to start "blindly" purchasing shares on a more frequent basis now and not be so concerned with timing purchases.

This long bull run makes a lot of stocks look like a winner and most near 52-week highs. Just don't know if a new floor has been set at this stage or if we'll see a repeat of historical corrections.

[autoxer]

I need to start "blindly" purchasing shares on a more frequent basis now and not be so concerned with timing purchases.

Make it an automatic transfer every time you get paid and you won't have to think about it so often.

[Nutria]

Make it an automatic transfer every time you get paid and you won't have to think about it so often.

Aren't computers grand???

[disneysteve]

Just don't know if a new floor has been set at this stage or if we'll see a repeat of historical corrections.

Of course you don't know. Nobody knows. Will there be more corrections? Absolutely. We don't know when but we can be reasonably certain they will happen. But that's why market timing doesn't work. Just keep investing day in and day out no matter what happens and don't worry about the daily or weekly or monthly gyrations of the market.

We started investing with $50/month into one mutual fund in 1992 right after we got married. We now have a portfolio worth over $750,000 despite a couple of recessions and market corrections along the way. No matter what happened, we kept investing and it has paid off nicely.

[dczech09]

Grrr. There are always wrong answers. And usually right answers.

Sure. Investing nothing is the wrong answer. And the right answer could be seen as 15% of your gross income.

However, I was speaking in vague generalities. No need to take everything so literal, Nutria.

[dczech09]

While I agree with you that small, regular investments are best for new investors, I fully funded my Roth for tax year 2015 as a lump sum. I prefer to make it an annual event. After reading several boggleheads discussions it was clear that it does not really matter too much whether you DCA or not. Time in the market vs. timing the market, so to speak.

Yeah there are definitely two schools of thought: lump sum investing and dollar-cost averaging. Mathematically, lump sum investing has the edge over the short-term. However, I would argue that dollar-cost averaging is much more convenient and easier to budget for. After all, who has the ability to invest $5,500 at one time every single year? Unless they have bonuses, or they save up over the course of year, a lump sum investment model may be unattainable for most people. So I like dollar-cost averaging due to its compatibility with most people's budgets and income-streams.

In the long-run, there really is not too much of a difference between the two strategies. Time IN the market matters most, and this comes down to people starting to invest while younger (thus giving them more time to let compounding take effect).

Excellent point!

[dczech09]

Of course you don't know. Nobody knows. Will there be more corrections? Absolutely. We don't know when but we can be reasonably certain they will happen. But that's why market timing doesn't work. Just keep investing day in and day out no matter what happens and don't worry about the daily or weekly or monthly gyrations of the market.

Agreed. The ability to endure market gyrations has a lot to do with whether or not one succeeds as an investor. Time IN the market wins.

I made a statement on Facebook a while back that selling in the turbulent stock market environment was not wise and that staying strong on your position was best. Someone argued that selling was best so that you could prevent losing money in a crash. What happened? The market went up from that date and that person lost some ground.

No one knows when the peaks and valleys will be. No one knows when the market will go up and when it will go down. Market timing is a huge lie, and if you do not believe me, then tell me why so many companies are so eager to sell their "revolutionary" trading system/strategy. Trading generates huge revenues for the players in the industry, but it hurts the speculators who engage in it. VERY few people ever succeed as traders, and those who do experience short-lived success.

This is why I am a buy-and-hold, dollar-cost averaging investor. I know that it will work long-term.

[Nutria]

Sure. Investing nothing is the wrong answer. And the right answer could be seen as 15% of your gross income.

However, I was speaking in vague generalities. No need to take everything so literal, Nutria.

I've just seen that New Age Zen there are no wrong answers thing since the 1970s, and the manifest wrongness just irritates the snot out of me. Which reminds me of an xkcd comic.

[feh]

I need to start "blindly" purchasing shares on a more frequent basis now and not be so concerned with timing purchases.

This long bull run makes a lot of stocks look like a winner and most near 52-week highs. Just don't know if a new floor has been set at this stage or if we'll see a repeat of historical corrections.

If you really want to start doing paragraph 1 above, you should not even be thinking about paragraph 2.

[sv2007]

For investing in taxable and IRA accounts (not 401k), what amount does everyone typically contribute when dollar cost averaging?

I typically establish a position with $750 to 1000 (stock or ETF), then contribute $300 to $500 when ready to add more shares. Trading fee is $5 or $7 per buy transaction.

Just curious to see what others feel is a reasonable amount when dollar cost averaging into an investment.

I used to worry about trading fees (and that was back when discount brokers were charging $35/trade in 95); when online trading drove fees down, I still worried and realized that my performance could have been better had I not cared about fees. (Sure, if you buy $10, the fee is going to be painful, but $100?) You can easily check if you should have been fee-avoiding by running past analysis on your purchases (hindsight is 20/20).

So now I buy a company I like without caring about fees at all. Sometimes, I'd even split a large order up if I think the price is high ATM; I don't time the market, but I sometimes don't follow that rule 100%.

The take away is that you can already run past scenarios to see if avoiding the fee was a wise move. And the results will be totally , entire accurate too because once again, hindsight is 20/20.

[MichaelHulse]

Dollar cost averaging (DCA) is the technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price.

[AJ444]

I invest in my taxable account in increments of 1k, I want to avoid having a ton of very small lots even though the brokerage now is required to track each lot. I don't reinvest dividends either, they go back into checking to be part of the accumulation for the next 1k investment. This also enables me to tax loss harvest.