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Imagine that your friend has $200k invested in the stock market. Would you advise him to sell all his stock and then buy it back over the next two years? That's functionally equivalent to DCA.
I get the emotional appeal (avoiding remorse if things go south), but it's tough to defend.
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That's an awesome analogy! I'm totally stealing that. (And adding the caveat that we handwave away any tax liabilities and benefits, e.g. higher cost basis.)
You'd only sell and DCA back in if you knew the market was going down, and thus you should only DCA in if you have the same information. Absent any specific inside information that isn't already priced in, of course you wouldn't do that.
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If that friend invested all of it yesterday, I would.
If he however has built up a portfolio during the last few years, I would not.
I am interested in index fund, which in my country does not pay dividends.. so I would look at a 1-3 year down time pretty intense by my standards, as I am not investing more during ( I`m paying of the house in 5 years ) during that time.
The index funds will reinvest the dividends they recive, but its still a though deal looking at say -20 to 30% loss for that amount of period.
DCA during 2-3 years for the faint of hearts, Lump sum for the optimists... ? :)