Walter Updegrave disses dollar-cost averaging strategy

[MoMan]

I really like this guy. He used to be the writer for CNNMoney's "Ask the Expert."

Anyway, I was surprised, and intrigued, by the Vanguard study he discusses in his most recent column:
http://realdealretirement.com/why-dollar-cost-averaging-is-a-lousy-retirement-investing-strategy/#more-13695

He lays out some really good reasoning for investing a lump sum all at once instead of portioning it out over time. Unfortunately, I don't have a lump sum to invest, so I will continue to drip (er, I mean pour) my money monthly into my 401(k) and other taxable accounts.

[I'm a red panda]

Unfortunately, I don't have a lump sum to invest, so I will continue to drip (er, I mean pour) my money monthly into my 401(k) and other taxable accounts.

I think you are conflating two things.

It doesn't make sense to hold onto money to spread out over time.  If you have a lump sum, it is best to lump sum invest.

At the same time, it doesn't make sense to hold onto money to put it in as a lump sum; if you have a little bit at a time, you should put it in when you have it.



The article starts with the assumption you HAVE a large sum.  If you don't- then continually buying in with whatever you have is what you should do.

[runewell]

Right, when people have money put into their 401k's every paycheck, sometimes I have heard to it also referred to as DCA.
While it investments occur periodically, it's not like I am choosing to stagger the contributions, it's just that I only get those contributions every two weeks as I earn them.

In general I agree that DCA is a losing proposition.  If we knew for sure next year the stock market were going up/down we would definitely invest it all/stay out of the market.  Since we do not know for sure, we follow the long-term trend and invest immediately.  If you choose to DCA, you must believing the market will go down and therefore why are you investing at all ?