Yes really. I just watched a couple videos poo-pooing Dollar Cost Averaging (DCA) which motivated this short article. Everyone who invests in the same market more than once is taking advantage of DCA. Other terms you may have heard are Average In, Average Up, or Average Down. There are probably others too. But, the operative word is "average". Any other words with "average" are merely qualifiers to provide a description of how that person prefers to enter the market. But, the fact is that every investor who puts money in the same market multiple times IS taking advantage of DCA. I know. I repeated myself.
Now, I need to separate two types of investing, lump sum and periodic. Lump sum is where you have a sum of money that you want to invest. Periodic is where you invest money as it becomes available like each pay period as an example. You could make an argument that the money you have available periodically is also a lump sum. Lump sum is just a term. In both cases you have some amount of money that you want to invest. It may be a windfall that your parents gave you, your income tax refund, or whatever that we get at odd and maybe unexpected times but certainly not on a regular basis. Then, because you are a planner and manager of your money, you know that you have money available every pay period to invest. All of those are lump sums in essence.
So, now the question is, do I invest all that money at one time or break it up into smaller amounts and try to time my entries. This is where the illustrations in those videos come in. So, watch them closely. They advocate for committing the lump sum and they provide a mathematically compelling case for that and one in which I agree. However, clarification is necessary as I've hopefully provided.
Your every day management of investments can be simplified by this concept of average. There is no way for me to remember the price I entered the market for every investment. However, I can simplify that considerably by averaging all those purchases to get a guess what ... average price. Now I know at any moment how my investment is doing. I know my average price and I know the current price. Compare the 2 and you know whether you are up or down. So, if the entry price is lower than your current average price then your average price will go down. If the entry price is higher your average price is higher. Simple isn't it? Oh yeah. There are Apps available to help you with this too.
I guess I should mention that for DCA to work in your favor as a long term investor, the market must be going up overall.
I hope you can conclude that DCA is a concept that EVERY long term investor who enters the market at multiple times and leaves at least some money invested at all times IS taking advantage of and it WORKS. Otherwise, no long term investor would make money. However, as the videos clearly illustrate, commit the lump sum as as lump sum regardless how large or small.
DISCLAIMER: I am not a professional financial advisor. I am not providing any advice on how you should invest or what you should invest in.
The videos I mentioned are at the link I'm providing so you can watch them for yourself.
https://steemit.com/money/@danielownsall/dollar-cost-averaging-is-a-fools-game-dont-feed-the-fish
I think Dollar cost averaging is a great strategy. That being said, if the market pulls back 40% I am going all in. Don't want to miss that upswing.