I just want to share thought that crossed my mind since Tesla dropped 12% yesterday and will probaly swing up again as violently in the near future: DCA

You all know the topic, I just made some computations based on an example and a real world case.

Say you invest 150$ a month in a specific security that has a high volatility. In a very simple model, that could mean that a stock oscillates like a sinusoidal wave between 5$ and 15$ monthly, and the mean value is 10$. Now if you buy two times at the mean price of 10$ a share, you end up with 30 shares after two months. If you hit the top and the bottom of the price, you end up with 150$ / 5 $ = 30 shares, plus 150$ / 15$ = 10 shares, which would be 40 shares total.

Of course this example is really simplistic, but it shows the concept.

Now I have spread-sheeted this one out for a ridiculously volatile stock I very much like. TESLA.

Over the last 6 months, I computed the mean share price per day as well as for all 6 months, and assumed buying shares for 1000$ per trading day (obviously only to keep the numbers simple), or 125,000 in a lump sum.

If you buy shares for the mean price over 6 months, you end up with **449.74** shares

If you buy shares for the mean price on each specific day, you end up with** 454.87** shares

So in this example with a volatile single stock, you probably receive an upside of 1.13% for not caring about the news and not attempting to time the market.

This difference is so large, that it makes up the higher trading costs for smaller investments, which are in my specific case for an investment of 2000€ 9.9€ for a single purchase (or 0.5%) or 1.5% if you make monthly contributions of a fixed sum. This example still ignores if a stock has an uptrend or downtrend.

**Long story short:** If you want to buy into specific stocks for fun, you might want to consider DCA if the target sum is comparably small (which it should be, because of the single equity risk). This also means that making your monthly contributions as your pay checks arrives instead of forking out a larger amount every few months after first accumulating said sum not only gives you more time in the market, but also possibly a minor volatility bonus. And peace of mind, because it's automated.