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DCA is just rebranding for chasing losses.
(thelemmy.club)
Crossposted from https://lemmy.ml/post/48918911
The irritating DCA thing is just a manipulation from bankers , stimulating the worst possible gamblers mistake - chasing losses. DCA claims it averages cost of participation, but that is a pure fallacy: these are independent events and probability of winning does not increasing with each “entry” even a cheaper one. What bankers are proposing to you is that you play again to cover previous losses. But the next play has the same probability to losing as the first one .
So this is the most reliable way to grow your capital in conventional assets. If you put 10% of every paycheque into a mix of stocks and bonds, not worrying too much about whether stock prices seem high or low, you will almost certainly have enough to generate a meaningful income after twenty years. The problems with this strategy in crypto seem many, including "no reason to expect that crypto prices will grow forever" "massive price manipulation by insiders" and "omnipresent theft and fraud." That is like how quantum mechanics is powerful for manipulating the world, but quantum woo just lets you manipulate people. It would not make sense to read a Deepak Chopra book and say that physicists made up quantum mechanics to con people onto buying their self-help courses and fake medicine.
If I understand it correctly I think the most important part of the process is simply the fact that it's putting some share of your current income into an actual growth investment. DCA in that sense is less about getting a better return on your overall investment, and more about starting to build those long-term investments in a way that has a predictable and minimal impact on your day-to-day household budget. It's not answering the question of "what should invest in" but rather "how do I start investing?". In that sense I guess we should probably be more clear that you can DCA into actual solid long-term investments rather than throwing your money at crypto. Hell it would probably be less destructive on net to take your monthly DCA to the literal casino and put it all on black.
That actually raises an interesting point. I would be curious to see if DCA is actually doing some harm mitigation by giving the truly pilled victims a maximum that they're going to throw to the grifters, compared to how often people set it as a minimum amount of money. If they weren't DCAing would they be investing less by waiting to see what was left at the end of the budget or more by not bothering to seriously plan their expenses at all?
I think the term came specifically from the problem "what to do with a windfall?" Since a diversified portfolio of conventional assets will tend to grow, the theoretical optimum is to invest it all today, but if there is a stock market crash or a spike in interest rates tomorrow this can lead to regrets. If you have trouble with this, a common strategy is to commit to investing 10-20% a month so you will get some high prices and some low prices. The same if you inherit some shares which are too much of your net worth and are worried about selling them before the price rises or keeping them until the price crashes: commit to selling a certain amount once per week or month and follow that. In casual language it gets conflated with the principle that a regular schedule of saving and investing is better than waiting until you get a raise or find the 'right time' to buy in.
I think the OP thought he understood this concept from reading Internet posts on crypto spaces and a better way to learn is a book or at least a blog by a trained and certified professional.