On top of your DCA, how do you deploy your reserves?
I see a lot of people in here say they have dry powder or will buy certain stocks at dips. While I know most people say just dca and forget it. For those who don't, what is your method?
W.B. has been stock piling cash for years. T.N says dca but also save cash so you can double down on the major dips. But on the contrary Graham Stephen just made a video about how he's now just dca-ing without looking as well as diversifying more because anytime he tried to time the market he's mostly been wrong.
Not trying to shed light on these people but what is your cash reserve strategy? Wait for it to go down x%? What percent is your threshold?
I know there's a lot of value investors in here. Are you buying anything that's at a discount while your cash is available that week? Or are you waiting for the discount on the few stocks that you believe in?
How do you deploy your cash reserves?
byu/CopsNroberts instocks
Posted by CopsNroberts
6 Comments
If seems like a particularly good time, margin (within reson of course). Then use contributions/ dividends to cover.
Idk who that is but don’t trust or listen to YouTubers for the most part they’re all shit or they wouldn’t be making YouTube videos for money they’d be beating the market instead.
For me, I don’t like having cash, I keep a short term cash supply for a few months expenses in a high yield savings, the rest of my “deployable cash” is more about broad market funds that I can sell into individual stocks, or sector funds (vgt heavy) if I feel there’s an opportunity in something.
I think DCA is more useful for times on big swings in price from nothing fundamental but merely market panic of some sort. But simply buying low after a stock drops without knowing the whether the news has changed the thesis on the name isn’t wise.
WB is piling cash because his stocks have hit his valuation threshold. In other words the market is overpaying for the growth.
So pull backs on stocks you own and nothing fundamental changes other than market valuation, then DCA can be a great compounder.
i have a pile of cash from savings etc above the 6mth to 1 year emergency funds. I dca a set amount every month at a rate that will deplete the excess within a year.
the worst peak to trough crash we had in recent history is 50% from the GFC. i divide my excess cash into 10 tranches and every 5% down if we hit that level i will just put 1 tranche in. if we crash worse than the gfc, i guess im F’ed
I used to do that but if you’re wrong it ties you to a stock more than just DCA and forget. If you use your dry powder and it doesn’t rebound quickly you miss out on other stocks that do.
I have about 3% in bonds that is my dry powder for something that I wish I was tied to more. I do it to lower my purchase price and sometimes react to upcoming events. I have a decently hard time convincing myself to deploy it though. I mainly use the dispersements to add to positions like that though.
DCA VOO, buy good individual stocks when they are down 20% or more. Average down if they keep dipping. The only risk is running out of money, which has happened.