facebookWould like to put 30k in ETF. Should I buy all at once, or should I DCA? Any advice? - Seedly

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Anonymous

11 Oct 2021

βˆ™

General Investing

Would like to put 30k in ETF. Should I buy all at once, or should I DCA? Any advice?

Should I buy all at once or DCA?

9

Discussion (9)

What are your thoughts?

Sharon

Sharon

12 Oct 2021

Level 10Β·Life Alchemist at School of Hard Knocks

If you're referring to purchase from open market & not through a robo-advisor, I will do 1) one lump sum + 2) DCA + 3) options (sell cash secured puts to lower your cost of investment).

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Assuming your $30,000 is in USD:

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All figures in USD

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e.g. ARKK

Current ETF Price: $110

1 lump sum: $11,000 today

DCA: Set aside $1,000, starting 1 Nov

Balance: $18,000 for remaining DCA.

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Meanwhile while waiting to DCA for the subsequent months ahead, you can do a sell cash secured put option contract at the strike price i.e. the price you are willing to pay for if it gets assigned to you.

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Let's say it's at strike price $100. So you will need to set aside $10,000 lump sum (1 ETF option contract = 100 shares - please check for other ETFs), in the event of an assignment.

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In return, you collect a premium from the buyer of your contract, for example, (I'm just throwing out a number, this amount may not be true), $200.

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You generate a 2% return on the $10,000 balance sum you have, while waiting to DCA for the subsequent months ahead.

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As for the remaining $8,000, you can either do sell cash secured put on other stocks (fundamentally strong companies), but do note this will be risky if the stock price gaps down or if there's an earnings release, then you may have to take the stock if the shares get assigned to you.

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Alternatively, you can put this $8,000 aside and don't touch it for the next 8 months for DCA.

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Long-term wealth creation is through consistency. The 2% return on the $10,000 balance is to reduce your cost of investment i.e. You paid $11,000 lump sum, now your cost of investment is $10,800 ($11,000 - $200 premium).

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Options can generate cashflows, but unless you really need the money now urgently, I'd suggest to plow back your returns into your investments.

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Ultimately, the end goal is to have a sufficient pot to fund our lifestyle comfortably when we retire. Hope this perspective helps.

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Billy Ko

Billy Ko

12 Oct 2021

Level 11Β·Financial Analyst at REPE Firm

Ultimately it depends how convicted you are of the current ETF price. Are you 100% confident this is the best price you can obtain the ETF at? If you're somewhat shaky then as what others have commented, you can consider DCA-ing.

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Not sure which ETF you are referring to but it would be good to identify when's the best time to DCA. Contrary to not timing the market, one can and should actually time when's the best time to DCA.

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Take a look at the chart attached. It's a chart of VOO (tracks the S&P 500 index). If you observe for the past couple of months, since May this year, this ETF is supported by MA50 (yellow line), everytime it touches MA50, it would bounce back up. And when one takes a closer look at where the MA50 is usually hit, it is the 3rd week of every month. This may not hold true for the coming months as one can see the market getting a bit choppy and even falling below the MA50. Seems like this MA50 has turned from a support to a resistance.

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I've laid out the facts, how you wish to intepret and act on it, its up to you. Hope you find it useful.

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TS

The Super Long Ark

11 Oct 2021

Level 6Β·Full-Time Trader at Barista FIRE

I like to buy in trenches. one popular way is dividing it into 3 portions, in your case 10k, 10k, 10...

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