Was initially set on investing $10k lump sum followed by about 5k-6k every 4 months using SCB to minimise cost of trading. But I've read that given the current economic climate, lump sum might be risky; instead, monthly DCA might be better to mitigate risks. In that case, if I use IBKR to invest about $2k a month, does it seem like a better option?
Hi Charlie! Great question! I am passionate about active investing BUT I know majority will benefit from just DCA.
I think the short answer is it depends on your knowledge and ability. For most people, DCA is better.
Keeps you invested consistently
However, if you look at virtually any great investor, you name it you pick it, Warren Buffett, Charlie Munger, Peter Lynch, Cathie Wood, Howard Marks, Alessio Rastani, Adam Khoo etc...
They got to where they are using an active approach. Reasons being...
Markets can be overvalued + short term overbought
When prices are high, the risk increases not decreases. When prices are Low, risk decreases not increases - Intelligent Investor by Benjamin Graham
They are times when it rains gold and you need to go big - Charlie Munger
However, active investing requires a lot more knowledge and effort hence even Warren Buffett and Adam Khoo have mentioned DCA into the broad market is good.
In Summary, it really depends what you have affinity to. For active investors, the price may be too risky, illogical and unprofitable to put the same amount in as compared to when prices are selling for huge discounts and larger chunks of money should be put in.
If you are looking for "safer" investment strategy, DCA is definitely safer as it spreads the price of the ETF u holding across a longer span of time. This is especially crucial in current climate of bigger fluctuations in the stock markets in recent couple of years. But if you are intending to be doing really short term trades, then of course lump sum is the way to go, but with higher risk-reward.
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