Does Frequency Matter?

[Tommy_Dolitte]

I'm currently investing a fixed amount 2 times per month.

Would I benefit more from DCA if I spread the amount over 4 weeks....daily?

Thanks,
TD

 

[malakito]

No and no.

malakito

 

[IDunno]

I'm currently investing a fixed amount 2 times per month.

Would I benefit more from DCA if I spread the amount over 4 weeks....daily?

I believe that you would benefit from a higher frequency when the market is trending up, and benefit from a lower frequency when the market is going down. But, DCA assumes that the market isn't logical, and goes up *and* down, randomly. So unless you can predict the way the market is going to go, frequency shouldn't be very important.

Typically, people DCA monthy, as it's easy that way. Yearly would be too infrequent (in my opinion). Twice a month is fine; daily would be overkill (especially if there are any fees involved in the investing; even stamps would start to add up with daily investing, if mailing money).
-Scott

 

[cute fuzzy bunny]

The ideal strategy:

Dont DCA when the market is going up, put it all in at once.

DCA as infrequently as possible and in as small an amount as possible while the market is going down, then when it hits bottom, DCA all of your remaining money in that day.

Only one problem with this strategy...

Lets look at a slightly modified version without that nasty future predicting problem...

If you believe the market is undervalued, dca in larger amounts more frequently. If you believe the market is overvalued, dca in smaller amounts less frequently.

 

[John Galt]

Re. "Does Frequency Matter?". I really wouldn't know,
but it seems important to my wife

John Galt

 

[cute fuzzy bunny]

Less frequently I presume?

 

[Cut-Throat]

Less frequently I presume?

LOL

 

[cute fuzzy bunny]

I'm fairly certain there were no old women involved with inventing viagra.

"Fer chrissakes, i'm 70 years old, put that damn thing away and lets go watch tv!"



By the way, our ability to hijack and devolve a thread astounds me.

 

[unclemick]

Mae West Truth or legend? And then there are various forms of 'value averaging' - but I'm not sure where that fits in a hijacked thread.

 

[retire@40]

Re. "Does Frequency Matter?".   I really wouldn't know,
but it seems important to my wife

John Galt

How come you wouldn't know? Aren't you there?
I'll tell ya, you get no respect.

 

[cute fuzzy bunny]

You'd think he would, since his wife likes to talk to him during the act.

At least if theres a phone nearby...

 

[sgeeeee]

You need to answer a number of questions before you can address your question adequately. . . What is the source of the money and what are you DCAing into? If the source of the money is your paycheck, then what would you do with the money until you invest it?

If you are investing a regular amount from your paycheck into equities, then historical returns are best if you invest at a rapid rate -- as rapid as your paychecks. Of course historical returns may not predict future results.

If you are moving money from a bank account to equities, then historical returns are best if you move the money as a lump sum . . . and don't DCA. Of course you also increase the downside risk by doing this.