Lump - Sum Vs DCA ?

[Mecisteus]

If the apple fall to $9.50, I sell them. I keep all my cash. When the apple falls to $2, I buy back them back again. When the apples rise to $5, I'm already in profit. I don't have to wait until the apples to reach $10 to be in profit and I don't lock up my capital for unnecessary risk.

Wrong!

If you know apple is going to fall to $2, you should leverage to the max and short at $9. You don't just sell.

 

[peterchan75]

How about this strategy....
IF I know the stock is a winner... lump sum.
IF I know the stock is a loser... DCA... nah.. I won't touch it.

I tell you solemnly... during decision time(buy or sell), it's a lonely place with fingers on the keyboard and eyes glue to the screen.

 

[alexchia01]

Wrong!

If you know apple is going to fall to $2, you should leverage to the max and short at $9. You don't just sell.

Ya, I'll short it, but many people still don't know the concept of shorting.

 

[fulat1]

I notice there is something not clearly defined here.
are we talking about stock or etf?
if etf probably of course i will probably do a dca..but if it's a stock, it will be difficult to do a dca as i don't even know whether the company will survive 10 - 11 years..

 

[Mecisteus]

I notice there is something not clearly defined here.
are we talking about stock or etf?
if etf probably of course i will probably do a dca..but if it's a stock, it will be difficult to do a dca as i don't even know whether the company will survive 10 - 11 years..

It applies to both.

When you buy a stock, you believe the company will survive perpetually or will be acquired. If a company is going to bankrupt on year X, then the share price will be depressed now.

 

[limster]

I average down ES3(STF ETF) when it was at $2.2 to $1.7. Fear kept me out when it was at $1.5. What is the chance of 30 stocks going bust together ? I won't do it on a single stock. I won't put all my money on ES3 either. Because the Japan bear market lasted more then 20 years.

I also averaged down all the way to the bottom. I ran out of cash but fortunately i had CPF-OA.

I also had CPF-SA and I used a little bit for First State Bridge near the bottom.

 

[limster]

Easy to say then done.

You forgot than human beings are emotional creatures.

If you brought at $10 and see the price drop to $2, how many of you still dare to buy at $2.

Many will hold at $10 and hope that the price would goes back up $10 in the long run.

Worst are those that sell at $2 out of fear.

I don't do DCA. I'll exit at $9.50 and buy all at $2.

If the company is not making any money, then of course there is fear.
If the company is profitable, I got no worries. I buy more, while remaining diversified.

Comfort Delgro, Singtel are some examples. Price crash, but still profitable and paying dividends. I will buy more. The stock price not relevant to me since my holding period for shares is forever. I am more interested in whether it is profitable and can pay dividend.

 

[alexchia01]

If the company is not making any money, then of course there is fear.
If the company is profitable, I got no worries. I buy more, while remaining diversified.

Comfort Delgro, Singtel are some examples. Price crash, but still profitable and paying dividends. I will buy more. The stock price not relevant to me since my holding period for shares is forever. I am more interested in whether it is profitable and can pay dividend.

If you are like Warren Buffett, has bottomless pocket, yes, you can do this.

However, how many of us has unlimited cash to continue buy as the price falls lower.

Singtel is $3.35 now. If you start doing DCA now. If the market crashes, it falls to $1 and stay there for the next 10 years, you'll take over 10 years to recover.

I rather sell at $3, wait for it to goes to $1 and buy at $1. By doing is, I'll be in profit once the price starts to rise. This is a much efficient way of investing your money than doing DCA.

 

[limster]

If you are like Warren Buffett, has bottomless pocket, yes, you can do this.

However, how many of us has unlimited cash to continue buy as the price falls lower.

Singtel is $3.35 now. If you start doing DCA now. If the market crashes, it falls to $1 and stay there for the next 10 years, you'll take over 10 years to recover.

I rather sell at $3, wait for it to goes to $1 and buy at $1. By doing is, I'll be in profit once the price starts to rise. This is a much efficient way of investing your money than doing DCA.

Every month most investors earn some salary unless they are 'full-time investors' Some of this salary can be used for DCA. No need unlimited cash, all you need is regular monthly income to continue to average downwards.

If i can collect dividends , i got no problem. I bought the shares to collect dividends, not for capital gain.

Earnings are more important to me than share price. Got to look at earnings quality and sustainability of dividend. I wouldn't have bought Noble, let alone averaged down . But Singtel, Sembcorp, CDG, I look at the fundamentals, I'm ok to average down.

Definitely your return will be higher if you sell high and buy low. But not everyone can do that.

 

[buaytuckchek]

Came across an interesting video explaining the “bug” in Dollar Cost Averaging (DCA). In the video, it explained the idea of DCA and why many thinks it is a good means to mitigate risk instead of lump sum purchase.

The problem of DCA comes when the period of investment gets longer, the effects of the averaging gets less (the average price gets less affected by the next buy-in). E.g. At the 24th month, the next buy-in is only 4% of the total invested sum while 5 years (60 months), the next buy-in is only 1.7%.

 

[skavnox]

Came across an interesting video explaining the “bug” in Dollar Cost Averaging (DCA). In the video, it explained the idea of DCA and why many thinks it is a good means to mitigate risk instead of lump sum purchase.

The problem of DCA comes when the period of investment gets longer, the effects of the averaging gets less (the average price gets less affected by the next buy-in). E.g. At the 24th month, the next buy-in is only 4% of the total invested sum while 5 years (60 months), the next buy-in is only 1.7%.

Sorry I can't play the video due to some error.
What's the "bug" that's mentioned in the video?

 

[Perisher]

That's the bug video.

 

[ipaq4444]

what about a mix of 2 position sizing DCA?

 

[swordsly]

That's the bug video.

Hmm just saw this.
What are your opinions on what is being mentioned?

 

[Toni90]

What bugs? There is no big.