Hi everyone,
I’ve been in the market since 2020 and I’m looking for advice on dollar cost averaging (DCA).
If you had 40k to invest across 5-6 stocks, how would you approach DCA?
Over what time period would you deploy the capital?
Does the DCA timeline depend on the stock, or do you follow a fixed schedule?
Do you keep cash on the side, and if so, how much? Or are you 100% invested?
Some of these stocks are already down ~20% over the past 5–6 months, which makes timing even harder.
My biggest problem is thinking I’m buying the bottom when I’m not. I know timing the bottom is nearly impossible, but even using charts, I still deploy capital too early and end up with no cash left while the stock continues to fall.
Are there any practical rules or frameworks you use to manage this especially to avoid deploying capital too fast?
Appreciate any insights.
Struggling With DCA Timing How Do You Deploy Capital?
byu/Alpphaa instocks
Posted by Alpphaa
4 Comments
You dont just DCA on stocks. Thats actually dangerous. Stocks can go to zero, or never recover again. You need to be aware of the thesis, and if the fundamentals play out. According to that, you can add capital. When the thesis doesnt play out, it actually better sometimes to exit the stock, even when you are at a loss.
Only DCA on broad market ETFs. According to the way you are asking your question, I think this would be the safest thing for you to do.
I think that DCA is the best approach for buying stock for long term.
DCA into etfs not stocks. Buy QQQ
Bunch of random thoughts: I don’t just continue to DCA into things. There has to be a strong thesis and continual re-evaluation of the thesis. I don’t want to over-allocate to a name or theme. I love looking for new ideas, I don’t want to just continue to buy the same set of names. Sometimes names get overextended and I don’t want to buy more. If names aren’t acting well, they are lessened or removed – everything in the portfolio is fighting for resources and in recent years I’ve become increasingly quick to drop anything that isn’t working. Sometimes things get away to the upside (“high quality problem”) and I don’t build the kind of position I would have liked to have/probably should have but I have a position with a good cost basis and if it corrects I can consider adding.
I do tend to look at charts, but as supplemental information rather than something that is the deciding factor. I do tend to start a lot of positions small (especially with things that are more speculative) but that’s not a guaranteed DCA – if something continues to work, continues to prove itself then gradually more gets allocated to it. If it isn’t working/concerns appear then it’s easy to dump a small position.
“avoid deploying capital too fast?”
IMO, I see too many people who are talking about buying the dip when something is down 1%. Buy every 1% down, you run out of money to put towards it by 5% down and it keeps going. I do think that one has to be patient sometimes although that’s increasingly difficult with the market post covid.
“Do you keep cash on the side, and if so, how much? Or are you 100% invested?”
I am generally close to 100% invested but what that looks like can change considerably at times.