Lump - Sum Vs DCA ?

[junlove]

Actually, according to the different research by Vanguard, Kitches and couple of others, time horizon is a major factor in making Lump Sum give way better returns compared to DCA if you have a large sum to invest no matter the price level you entered in.

It’s simply maths. Those research quote periods of overall bull market. No matter how u count. Lump > DCA. Take that across bear markets, Lump lose more pants. Take that across half bear half bull...sama sama lor...

If you compare I Lump 1980, he sTarted DCA 2000, might as well don’t compare. Anyway majority don’t all-in lump or DCA.

Just use simple excel key in parameters can count.

 

[Retribution]

Please read the research before commenting.

They looked at both bull and bear markets.

It’s simply maths. Those research quote periods of overall bull market. No matter how u count. Lump > DCA. Take that across bear markets, Lump lose more pants. Take that across half bear half bull...sama sama lor...

If you compare I Lump 1980, he sTarted DCA 2000, might as well don’t compare. Anyway majority don’t all-in lump or DCA.

Just use simple excel key in parameters can count.

 

[junlove]

Please read the research before commenting.

They looked at both bull and bear markets.

No..there are all bullish overall over periods in time (with many cycles of ups n down) Means both Lump n DCA went up.

U try doing over 1997 crisis to downturn, Lump vs DCA over SAME periods... maths will answer you

 

[junlove]

Even if you do orange to Apple of many Small Lumps versus DCA instead one big Lump, over SAME periods of time...math will still ans you...

 

[leoch037]

if u want either low or average or high entry point, do lump sum
if u want average entry point, do DCA

btw, the $$$ waiting to be used for DCA can earn returns too, eg. high yield savings account, FD, SSB, etc

 

[Mecisteus]

I assume everyone is on the right definition of DCA.

That is, splitting a big sum of money $X into $(X / 12) or $(X / 6) monthly investments.

I think it is still best to split up. There is some probability that you may end up buying at the peak.

 

[junlove]

I assume everyone is on the right definition of DCA.

That is, splitting a big sum of money $X into $(X / 12) or $(X / 6) monthly investments.

I think it is still best to split up. There is some probability that you may end up buying at the peak.

Yes but your comparison has to be X and x/12 at same start and end point. Comparing two modes at diff timeline is not correct.

if you all buying at a peak using DCA, compare to another suay Xin who use Lump. Both hum ji at same point down the road... u lose small...he lose big...simply...math

 

[Sai777]

Statistics shows lump sum > DCA; provided the sum of money is the same as the whether lump sum or DCA

The problem with most of us thinking that timing the market and invest when the market is at low. Hence most sat on huge pile of cash and miss the opportunity.

Hence, for most of us, DCA seems more acceptable

 

[leoch037]

Yes but your comparison has to be X and x/12 at same start and end point. Comparing two modes at diff timeline is not correct.

if you all buying at a peak using DCA, compare to another suay Xin who use Lump. Both hum ji at same point down the road... u lose small...he lose big...simply...math

my maths tell me u won't necessarily lose even if u started DCA at the peak, u only lose if it goes below the average

$10, $5, $2, $2, $5
average price is $4.80

therefore eventhou the price dropped from $10 to $5,
for DCA, u win $0.20 per unit

 

[sg_investor]

My lumpsum is millionaires' DCA.

 

[ExtremeWays]

If you know how to invest, you'll build a portfolio buying strong fundamental counters at the lowest price possible. No good investor do DCA.

DCA is a technique used by insurance agents to encourage their clients to continuously put money into their investment policy so that the agents can get monthly commission. Their clients think they are investing wisely, but in actual fact, they are not.

It is used by ShinyThing to sell his books for side income

 

[peterchan75]

Please do not get stuck with dichotomous thinking.
https://www.psychologytoday.com/blo...aby/201506/what-is-wrong-dichotomous-thinking

1. We don't know when is the bottom... so DCA approach will hit the bottom.
2. There are people who are so in tune with the market, they roughly know when is the bottom.

Above all the skills and techniques, it's our psychology.

 

[junlove]

my maths tell me u won't necessarily lose even if u started DCA at the peak, u only lose if it goes below the average

$10, $5, $2, $2, $5
average price is $4.80

therefore eventhou the price dropped from $10 to $5,
for DCA, u win $0.20 per unit

Tats not DCA...DCA is buying fixed dollar amt at regular interval regardless of stock price...

 

[leoch037]

Tats not DCA...DCA is buying fixed dollar amt at regular interval regardless of stock price...

yeah that quick calculation is inaccurate, actual calculation shows average price of even lower @ $3.33

anyway, my point is u won't necessarily lose even if u started DCA at peak, similarly u won't necessarily win if u start at bottom

for lump sum, entry point will decide the outcome

 

[ExtremeWays]

DCA is good when you are averaging up and not averaging down

 

[peterchan75]

DCA is good when you are averaging up and not averaging down

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.

 

[Mecisteus]

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 won't dare to average down with stocks too many times. Maximum 2-3 purchases then i will stop.

 

[alexchia01]

my maths tell me u won't necessarily lose even if u started DCA at the peak, u only lose if it goes below the average

$10, $5, $2, $2, $5
average price is $4.80

therefore eventhou the price dropped from $10 to $5,
for DCA, u win $0.20 per unit

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.

 

[BBCWatcher]

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

If you bought 6 apples for $10, and then the supermarket has a sale on apples and you can buy 6 more for only $2, wouldn't you stock up on apples? Even buy 30 of them, make some extra apple pies and cakes, and so on?

It's the same thing! If there's a sale on stocks, buy some more of them -- stock up!

There are many people who seem to have no problem buying more sale priced apples, baby diapers, laundry detergent, cans of corn, etc., etc. Whether it's emotion or not, a lot of people do this. But somehow they have a problem applying this same basic concept to stocks, even when the stock is literally named Apple. I suppose that's good for me and for other investors who certainly don't mind buying stocks that are on sale -- early 2009 was lovely -- and so it goes.

 

[alexchia01]

If you bought 6 apples for $10, and then the supermarket has a sale on apples and you can buy 6 more for only $2, wouldn't you stock up on apples? Even buy 30 of them, make some extra apple pies and cakes, and so on?

It's the same thing! If there's a sale on stocks, buy some more of them -- stock up!

There are many people who seem to have no problem buying more sale priced apples, baby diapers, laundry detergent, cans of corn, etc., etc. Whether it's emotion or not, a lot of people do this. But somehow they have a problem applying this same basic concept to stocks, even when the stock is literally named Apple. I suppose that's good for me and for other investors who certainly don't mind buying stocks that are on sale -- early 2009 was lovely -- and so it goes.

The concept is correct, but the psychology is different.

People buys apples is to consume them, not to sell them later. It doesn't matter what the apple price is because we just want to eat it and throw away.

Also, people don't spend a fortune on apples. Buying $10 worth of apples and additional 6 more at $2 is not a problem because this is just a small portion of their wealth.

Stocks are different.

People buy stocks to sell them later at higher price. The more the price falls, the more losses they incur and the more difficult for them to recover their losses. Psychologically, people panic when you see their wealth depreciate lower.

Also, people don't spend $10 buying stocks. They usually spend thousands and sometime their entire fortune buying stocks. If you spend half your fortune to buy at $10, spending the other half to buy at $2, takes a strong psychological mind. Even if you are strong and able to buy the rest at $2, what happens if its price falls to $1 or worst got suspended. Are you willing to take that risk?

My strategy is different.

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.