Confusion
Discussions of the problems with DCA can do a disservice to investors who confuse DCA with continuous, automatic investing. Unfortunately this confusion of terms is perpetuated by many sources discussing automatic investing (such as AARP and Motley Fool). The argued weakness of DCA arises in the context of having the option to invest a lump sum, but choosing to use DCA instead. If the market is expected to trend upwards over time, DCA can conversely be expected to face a statistical headwind: the investor is choosing to invest at a future time rather than today, even though future prices are expected to be higher. But most individual investors, especially in the context of retirement investing, never face a choice between lump sum investing and DCA investing with a significant amount of money. The disservice arises when these investors take the criticisms of DCA to mean that timing the market is better than continuously and automatically investing a portion of their income as they earn it. For example, stopping one's retirement investment contributions during a declining market on account of the argued weaknesses of DCA would indicate a misunderstanding of those arguments. The argued weaknesses of DCA do not arise because attempts at timing the market tend to be effective, but because investing in the market today tends to be better than waiting until tomorrow. Applying that knowledge to the average retirement investor's situation would actually support - rather than contest - a policy of continuous, automatic investing without regard to market direction.
Read more about this topic: Dollar Cost Averaging
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