[funnym0nk3y]

Has anyody done a thourough calculation with statistics and all?

Just from intuition DCA would yield less than one lump if the expectation value is larger than 0. But then there is variance. If the asset is volatile enough that even a short period of DCA investing is bringing down the price a bit, I assume.

[nly]

DCA gives you the best chance of getting mean/average returns, not the best returns.

If the market goes up year and year then obviously lump sum investing is best, but it doesn't. It goes through periods of over and under performance and then returns the mean.

In any case, it's academic for most us investing from our salaries. DCA isn't a choice.

[roflyear]

I also wonder what risk-adjusted is for DCA. I figure DCA is also more attractive in volatile markets, but don't have anything to back this up.

[kareemsabri]

The benefit of DCA (in my mind) is avoiding market timing risk. Sure, as another commenter pointed out, if a stock is only going up you better just get in and ride it up. But who knows? If you buy at the peak of a bubble, like in January 2022, it's not so great. If you're not studying the market all day, you can't really predict where it's gonna move (or even if you are).

And of course, many of us don't have a big chunk of cash sitting around waiting to get invested.

[ricardobeat]

That’s the spirit, but it doesn’t work like that. You can’t time the market without information.

Most of the time, in the long term, investing a lump sum beats DCA even if you buy at a previous peak.

[saltcured]

I think people in the comments are assigning "DCA" to either (3) or (4) below, but having different assumptions about what the alternative might be...

1. Have a pile of cash to burn and invest it immediately, to maximize time in market

2. Have a pile of cash and sit on it to "time" a later lump sum entry to the market

3. Have a pile of cash and invest it incrementally for some ramped entry to the market

4. Have recurring income and invest it immediately as it becomes available

5. Have recurring income and save/buffer it up to revisit the alternatives (1)-(3)

6. Use credit to obtain a pile of cash ahead of income and revisit the alternatives (1)-(3)

[kareemsabri]

I consider DCA to be equal notional amount purchases of an asset at a fixed period (weekly, monthly, annually etc.). That's it really. Wherever the money comes from.

[zhdc1]

> Has anyody done a thourough calculation with statistics and all?

Yes. There's a lot of research comparing dollar cost averaging with lump sum investing. Lump sum investing in a diversified portfolio (total market ETF) almost always wins, even in periods where markets are 'overpriced' (e.g., high CAPE 10 ratios).

[funnym0nk3y]

I have heard the same. But how could that be mathematically derived from a stochastic process? AFAIK the stock market is assumed to be a white gaussian process with mean larger than 0. How does the risk of bankrupcy and the variance of the portfoilio value at the end behave? How does it depend on the DCA period?

[jacobr1]

Most mathematical analyses that I've seen involve running prior sequences of real-returns of various lengths though a monte-carlo simulation. So the distributions of prior returns is baked in (via a uniform sampling of historical timeframes).

Here is a good example: https://www.portfoliovisualizer.com/monte-carlo-simulation

Plenty of the white-papers from the big mutual fund firms give the impression they use very similar analysis methods.

[senko]

> Has anyody done a thourough calculation with statistics and all?

Yes.

Watch https://www.youtube.com/watch?v=X1qzuPRvsM0 and read the papers referenced in the video.