Asked on 17 Jun 2018
I follow DCA + LSI in downtrend at prices below historical mean. Most important thing is never ever change your strategy depending on the market. In 2015, I did DCA in a uptrend market and did lumpsum in downtrend which cost me a lot of money and i regretted. I believe that buying lump sum multiple times as market is falling as the best hedge. Cos most of the time, i am just collecting and saving money and ignoring what others say about my cash value depreciating. I rather see it virtually depreciate 1-2% than to see a paper loss of 10-20% from buying above the historical mean.
it depends which market you are DCA-ing into. if US market, CAPE and PE is slightly over heated, if you expect it to drop, then do DCA.
but you think it is going to fly upwards, lump sum is better.
SG market is not as overheated. of course, it all depends on if you are able to do any valuation on your own side. If you know nothing, DCA-ing all the way brings no harm.
Either way works.
You can DCA with a lump sum on a yearly basis. Every year accumulate a lump sum and buy ETF. Over a period of 10 20 + years your annual lump sum investment is essentially a DCA with a yearly input.
Statistically, its always Lump Sum investments. The initial analysis was carried out by Vanguard has been replicated repeatedly since. The market is in an upward trend 2/3 or more of the time.
DCA is really only for people who don't have the money on hand to do LSI, or who would like to do aggressive investments but reduce some of their risk.
I'm into Dollar Cost Averaging aka Regular Savings Plan as you don't have to time the market and you purchase more shares if the market is going down and vice-versa. it's also passive which allows you to sleep peacefully at night knowing that your money will compound over time.
I'm for Dollar Cost Averaging, as you don't have to time the market. But the downside is that there is a need to pay a transaction fee on a regular basis and that can add up to be costly