ringledman
Registered User
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- 620
From my research, i came across academic papers, that said, if you have a lump sum, DCA on average gives a lower return (and hence has lower risk). This makes sense, as normally time in the market is the largest predictor of return, and if u DCA a lump sum, it will take some time to get all your capital in the market.
of course, risk and return are linked as usual, if you put it all in at what turns out to be an expensive time, you will not do as well, but if you put it all in at what turns out to be a cheap time, you will do much better. if you dca it, you will get a lower return, but you will have had less risk.
If you dont have a lump sum and you are saving from your income each month, then DCA is good, but then it should really be called "investing in an index each week from my spare income"
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