Article: Buy the dip/market timing vs dollar-cost averaging

[Liberty]

https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/

 

I thought this was an interesting thought experiment. Obviously it's not what investing in practice is like, but I think it shows the challenge that those who prefer to sit on lots and lots of cash and then only invest during a big crash face. They'll look really cool during the recovery and claim insane CAGRs, but if you look at it over long periods, over the whole cycle, it becomes a lot harder, especially if your timing isn't perfect (and who can claim that?).

[clutch]

+1

 

I'd say the real question is whether you should just buy it lump sum or DCA over time when you get some cash injection. There is some evidence that even buying it lump sum is better, e.g.,:

https://awealthofcommonsense.com/2018/05/the-lump-sum-vs-dollar-cost-averaging-decision/

 

[scorpioncapital]

why not both? steady DCA plus a sprinkle of lump sum during a downturn. Watching Berkshire he seems to be doing this too, regular small buying plus major buying at pivotal moments.

[Liberty]

why not both? steady DCA plus a sprinkle of lump sum during a downturn. Watching Berkshire he seems to be doing this too, regular small buying plus major buying at pivotal moments.

 

My preferred approach is to mostly stay fully invested and sometimes switch from more expensive things to less expensive ones, or from things that have grown too large in the porfolio to new ideas when they are available at a good price

[scorpioncapital]

That's a good plan. I do that too, although.. When I'm in a debt position I do DCA but only when I sell equal dollar amount of stock. That way I force myself to add new funds only if I've deleveraged somewhat. If market tanks, I never add for a few months or get back to a previous market value.