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<<If you have, say, $100,000 in stocks, how much protection are you really buying by investing an additional $1,000 a month for 12 months, as opposed to $12,000 now? If you assume the slower pace makes sense, shouldn't you pull out 11/12 of your existing investment, and put IT in slowly over the following 11 months?
>>


Nope I don't think so.

You are making assumptions that you know what is going to happen. I use DCA when situations have a degree of ambiguity.


I don't see where I am making any assumptions at all. I see where the person who DCA's is making ONE assumption in regard to money already in the market, and a DIFFERENT assumption in regard to new money. In doing this he's allegedly buying some small protection for the new money, but leaving the (potentially much larger) old money with no protection at all.

An analogous behavior would be to plan to build a new garage, and buy fire insurance your house - but only up to the value of the new garage, and expiring as soon as you finish building the garage.

I'm saying that this is silly - that the person should make ONE assumption about a possible investment and invest accordingly; if worryingly unsure of that assumption, the person should choose appropriate hedges covering the ENTIRE investment, not just the newest bit of it.

What that assumption should be - that's up to the person in question.
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