How do you balance DCA vs time in the market? Let's say I have 30k now ready to be invested? - Seedly
 

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Asked by Anonymous

Asked on 18 Oct 2019

How do you balance DCA vs time in the market? Let's say I have 30k now ready to be invested?

Should I jump straight in and risk that I'm going in during a market peak?

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Asheesh Chanda
Asheesh Chanda, Founder at Kristal.AI
Level 6. Master
Updated on 30 Oct 2019

You should start with a balanced portfolio where you hold some low-risk Bond ETFs along with some Equity ETFs and Gold. In the case of Equity Market corrections you can change % allocation to more in eq by redeeming some Bond ETFs. As an example, at Kristal.AI we manage this via certain Kristals like All weather Unlevered/Balanced or even Steady Growth etc by proactively rebalancing as our Investment Committee takes the consensus view to rotate the asset allocation. So you can either allocate dynamically yourself or rely on Kristal.AI to do so. Do note investments via us are free for up to 50K USD.

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Hi anon,

We don't know when the market peak is, or if it is even already past. Having said that, you can allocate a 1/3 1/3 1/3 strategy.

Start with 1/3 of your funds, go into the market. Take 1/3 of your funds and spread them over 1-2 years of DCA. And the last 1/3 can be used as a 'warchest' for market opportunities.

Remember, time in the market is far more important than timing the market. So don't time the market. Just go in. The results will show themselves in time.

For more information, do look at a previous question I answered here:

https://seedly.sg/questions/is-it-really-true-if-you-do-dollar-cost-averaging-time-in-market-outweighs-timing-the-market

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8

If you're worried about entering at too high of a peak, then you might want to invest a quarter of your money per quarter. Transaction costs of a 7.5k investment should be low enough to be negligible.

It'll give you some confidence that you are dipping your feet, but not too shallow to not feel the water, and not deep enough for you to drown if markets go south. All the best!

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4

Overwhelmingly, you don't balance it. DCA works in very short periods.

Even though the annualized yield was smaller on paper, the absolute return was higher. So if your time horizon is long (say, 20 years), you should invest it entirely regardless of the market cycle.

There is an analysis here:

https://www.moneymaverickofficial.com/post/how-my-5-2-investment-completely-destroyed-another-s-6-5-by-almost-300-000,

Which is based on white paper studies from Vanguard.

Money Maverick

https://www.facebook.com/luke.ho.54

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