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URL:  https://boards.fool.com/peter-dca-doesn39t-avoid-39timing-risk39-34093620.aspx

Subject:  Re: Limited funds Date:  12/27/2018  1:44 PM
Author:  Arindam Number:  29210 of 29473

Peter,

DCA doesn't avoid 'timing risk' --as you assert, but failed to prove-- because it is is a timing strategy, and it typically fails because it depends on longer time frames than most people have the patience for, never mind the the tiny little fact that getting back to even as much as 20 years later doesn't factor in the erosive effects of inflation.

There are only two ways to make money in markets as a long: 'buy low and sell high' and 'buy high and sell higher'. The first depends on 'mean reversion, aka, classic, Ben Graham-style, value investing. The second, on 'momentum', aka, 'growth investing, whose best exemplar is Wm O'Neil. (If you're a short, then reverse the process. Sell what's over-valued or sell what's being sold, and then cover lower.)

How much experience can be gained from once a month buying? Not enough, fast enough, to matter. Diane needs to be doing turnover, a lot of it, so she gains a sense of how markets work. That means making lots of small, commish-free bets, which isn't even one-third of what investing requires but what everyone want to focus on, the buying. There's also the selling, plus the god awful amount of back-office work that needs to be done.

But here's the grim reality. Likely, she's got a day job, plus a commute, plus a family life. So her time to learn the investing/trading game is even more limited than her funds. So, at best, she's a weekend warrior with 4 hours/week max to do her research and set up her orders, and the current market is toppy, and the economy is fragile, if not down right fraudulent, and not a good time to be deploying new money.

Arindam
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