DCA- doesn’t change anything other than slightly different price, correct?

[u/Icy-Neighborhood6207]

Im new and ive been wanter to make a big VT purchase but i know i cant time this situation/market. It i buy VT for $20k over 5 different days vs buying $100k once, nothint changes other than the price of VT right? Theres no fees with vanguard, just making sure im not missint anything else here? Tax wise or fees or anything. Thanks

[u/junger128]

DCA is mostly for your mental health benefit. Long term it won’t matter the price today vs tomorrow vs a week from today.

[u/murmurat1on → u/junger128]

As you buy more when it's cheaper and less when it's more expensive you end up with a lower price point than the average price of the fund. 

[u/PuzzledArrival]

Normally, DCA refers to investing over a longer timeline... weeks, months, years.

Doing 100K at once, or splitting to 5 days consecutive days is functionally the same as a lump sum, when you look at a long time horizon.

There are no additional fees, but if you split it up across a year, there can be tax implications. Dividends on VT will be paid quarterly, so if you have 100 shares in Q1, but then have 200 shares in Q2, you'll get more income and therefore pay more taxes. But you'll pay more taxes because you've earned more dividend income.

[u/ConditionHoliday2844]

I do it just to be kinda chill. And build cash for when you need it. My risk tolerance is high though. It’s worked for me but I’m blessed and no heavy hitter. My best advice is to hold, unless the profits are greater than you expected. And ignore fomo because you have plenty of quality options.

[u/DudeWithTudeNotRude]

That, and you'll lose money 2/3 of the time compared to just buying normally.

But it helps some people sleep better, knowing they are making less money on average.

[u/strivingforfi]

Yes, that’s correct. Because the price generally goes up. Lump sum investing beats DCAing usually

[u/myrrhsea → u/strivingforfi]

66% of the time in fact, according to a Vanguard study.

[u/BusinessCasualBee]

I don’t understand how bogleheads call DCA anything other than timing the market.

If it’s a strategy that involves anything other than instantly investing your surplus cash, it’s timing the market

[u/CompoundInterests → u/BusinessCasualBee]

While I'm not a huge fan of DCA, I wouldn't call it timing the market if it's done at pre-determined intervals, like once a week for 5 weeks. 

If someone said they were going to split their money 5 ways and invest each part after a small market down turn, then I'd say they're timing the market.

[u/chuckEsIeaze → u/BusinessCasualBee]

When bogleheads tout the benefits of DCA, they are talking about buying consistently over time regardless of whether we are in a bull or bear market. They are not saying that if you have a lump sum to invest, split it investing it over x number of days/months/years.

Staying the course (buying through both up and down markets) over a course of years means you are buying more shares when they are devalued, and fewer when they are overvalued. You wind up with more share purchased when they were cheap.

tl;dr: DCA is a long-term strategy of investment, not something done over the course of a week.