Anonymous
For DCA, should we stop buying if the share price is going up?
Eg.
Bought 1k x Y Stock @ $1 = cost $1k for 1k stock. avg purchase price $1.
Price of Y increase to $1.1, bought 909 with $999.9 (same $1k DCA limit), total 1909 stock, avg purchase price become $1.0476.
If stick with 1st mth, gain will be $0.1 x 1k = $100
If DCA with 2nd mth, gain will be $(1.1-1.0476)x1909=$100.0316
So technically I still gain even if price goes up. Please let me know if this is right. TIA.
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If the share price is up and the earnings are up, it is a normal pattern.
In normal circumstances, it should happen like this! I'd average up if it is a good company.
If share price is up but earnings are flat or down, I'll stop DCA on that particular business.
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Nope. The principle is that you do DcA in both good and bad times for the stock. However there are times when you stop your DCA. That's when the concentration to that particular stock is getting too high in your portfolio.
For that, you may consider stopping your DCA
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Purpose of DCA is to buy the stocks regardless of the price. Usually we do it on Indexes only.
You wouldn't know if the price would drop or it will continue to rise. So by doing DCA, we wouldn't miss out the low and generally in the long run you will be doing okay because market will only go up in the long run. Im refering to US SPY index. That is my understanding.
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Bjorn Ng
05 Dec 2019
Business Analyst at 10x Capital
Hello! Well, the principle of DCA is to invest a fixed amount of $ into the stock/ETF/UT, and the id...
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The whole purpose of DCA in layman terms is to keep buying with your eyes closed.
As long as there's inflation and you're buying an index (consider VOO, lowest cost ETF following the SP500), you will likely make money over the LONG TERM.