Anyone who has lump sum amounts of funds has the option to choose from 1) invest right away, 2) DCA and/or 3) buy on dips. A person with lump sum should at least consider all three of the strategies in regards to his lump sum amount, and surely he has to figure out his own balance in terms of how to treat such funds.
Many times people (including newbies) do not have have lump sum amounts available, so the most practical way to start it DCA... yet it may well not make sense to defer investment with DCA if the lump sum amount is already available... and so they should at least consider how or if to deploy the other two strategies. and they are ultimately the one responsible for their own choice whether they choose well or if they screw it up. there is probably no exact one best correct choice, even though it is likely bets to be tailored in accordance with the
person's personal factors.. which they have to figure out, in case they don't already know them at the time of starting out in their investing in bitcoin.
Honestly, that point really hit home. Not everyone has a lump sum to invest, but for those who do, it makes sense to pause and think things through....Whether you DCA, buy the dip, or go all in each option also has its own pros and cons. What matters is understanding your own situation and risk tolerance....
From the little things I have learning here , I have been able to realized that it is smart to mix strategies instead of trying to guess the perfect moment. A bit of structure with a bit of flexibility. Just don’t sit on your hands doing nothing, Bitcoin rewards action and consistency, not hesitation......
Sometimes it makes more sense to attempt to describe some hypothetical person to show how the ideas might be batted around and applied... and you can even imagine what you might do... Let me give an example and you might want to describe how you might approach the situation if you were such a person or if you were giving bitcoin advice to such a person.
Let's say that the hypothetical person is in his mid 30s, and he makes about $25k per year, and he had been building various investment (maybe something like stocks /index funds) over the past 10-ish years, so he invested about $25k over the past 10-ish years and maybe currently his investment portfolio is worth right around $50k.. So he is doing pretty good to have 2x his annual salary invested, and he had mostly been investing about 10% of his salary about $50 per week, and so over the years he had also established back up funds in cash that is about 3.5 months of his expenses so that fund is currently right around $5k (he considers his monthly expenses to be right around $1,400) .. so he heard about bitcoin, and he had been considering the possibility of having his new investment go to bitcoin. He also would be fine to take 10% from his already established investment portfolio and put it into bitcoin (which would be $5k-ish)..
He is also considering that if he invests $50 per week into bitcoin he is taking that away from his other investment and putting it into bitcoin. He also knows that he is going to be receiving a work promotion that means that 3x per year he is going to receive lump sum performance bonuses that could be anywhere between $1k and $3.5k depending on how well he does with his work performance (and how well the company does overall), so he was considering that he would be able to invest those anticipated bonus amounts into bitcoin too.. but he won't know exactly how much they are going to be in advance.. but they are expected to come around the middle of each of these months 1) August (2nd quarter), 2) January (3rd and 4th quarters) and 3) April (1st quarter).. What should the guy do?
If I were to be the one advising him as I have also learning too , I will say he is in a great position to start small and steady.
Well this guy already has a past practice of investing $50 per week, so converting that $50 per week over to bitcoin gives him a pretty slow and steady approach already.
So then the question is just what to do with the $5k extra that he could get from his other funds (in order to put his bitcoin at right around 10% of the size of his other investment portfolio. Sure he does not have to buy right away with the $5k, yet remember the other two categories involve deferral by time (DCA) and by price (buy on dip).
Regarding the deferral by time (DCA), that is to take money that you already have and then defer it (which DCA does not have to involve deferral by time, since if you are taking money from your income, you can figure out ways to invest as much of is as you can as it comes in, which does not result in deferral).. and yeah, you seem to be suggesting deferral by time with 30-50% of the $5k that is available, but then how much deferral by time and amount would that be? I would prefer a more specific number.. let's say 40% which would be $2k.. so if you say that you are going to add that $2k to your DCA, which might be reasonable, but how much time are you going to wait with it Over 1 month, 3 months, 6 months, 1 year or longer? and what if the BTC price goes up? if you defer by time and the price goes up, you did not help yourself, especially in this case we are assuming the person to be a beginner, so there may be some advantages to get some stake int eh game rather than starting out too small and steady.
Regarding the deferral by buying on the dip, there wouldn't be anything wrong with dedicating 30% to buying on the dip, either, so then $1,500 would be 30%.. and so maybe you could have $300 buy order for the first 10% dip and then an additional $300 buy orders for every additional 5% dip, an that would end up taking you up to a 30% dip. Maybe that could be a possible way of doing it, but you can have differing ways of structuring such a buying on dip with whatever amount is authorized.
By the way, i am presuming that whatever parts are not deferred, then that would be bought pretty much right away.. so that would leave $1,500 (30%) for buying right away. I personally would probably have more of that $5k dedicated towards buying right away or maybe over a few weeks, yet there is no real wrong answer as long as you consider each of the three buying categories and you are prepared to accept the consequences for whatever decision.
You are right, the guys consistent $50 per week habit already gives him a strong DCA foundation, so the main decision lies with how to structure that $5k....
Personally, if I were advising him, I would probably lean toward this kind of breakdown,
1) with 40% DCA ($2,000), he can Invest $125 each week for 4 months, along with his usual $50/week. This keeps things steady and less stressful during price swings.
2). 30% Buy on Dip ($1,500): Set automatic buy orders that trigger if Bitcoin drops starting at a 10% drop and then every 5% down, up to 30%. This way, he can grab BTC at cheaper prices.
3). 30% Immediate Buy ($1,500) he can Buy some right away to lock in a position. Since he is in it for the long term, it is good to have some Bitcoin now.
The beauty of this split is it gives him exposure now, allows for disciplined entries over time, and still positions him for a dip if the market turns.....No approach is perfect, but this balances patience and action well especially for a beginner building conviction and like you said, the most important part is owning the decision and understanding what each part of the strategy is doing for you......
Allocating 10% of his portfolio ($5k) to Bitcoin is smart. He can redirect his weekly $50 investments into BTC for consistent exposure (DCA).....
Remember the $50 weekly is already something that he is used to doing, so it would be coming out of his discretionary income, not from the extra $5k that he is taking from his investment portfolio to allocate it towards bitcoin.
That makes sense, Keeping the $50 DCA from his regular discretionary income means the $5k lump sum stays intact as a one time allocation..... It is a smart way to build exposure without disrupting his overall cash flow or investment balance.....
For bonuses, invest part immediately (30–50%) and DCA the rest over time.
I don't have a problem with the invest immediately, but I do have a problem with your saying DCA without specifying how much time or how to spread it out. Over 1 month, 3 months, 6 months, 1 year or longer? and what if the BTC price goes up?
You are also completely ignoring the buy the dip component, and don't get me wrong. I am not a big fan of buying the dip, but it surely could be a great thing to consider during any periods in which a guy has lump sum amounts available, so that if he buys with a portion of the lump sums right away, then the buying on dip could be a good supplement for any nervousness he might get from buying a bunch of bitcoin in a short timeframe.
You are right, just saying DCA without saying how long isn’t helpful. Maybe he can spread the $5k over 3 to 4 months, so that he is not putting it all in at once. That way, he avoids buying at a high point...... And yeah, keeping some cash aside to buy if the price dips is smart too. It can help him feel less worried if the price goes up or down after he starts investing.....
His emergency fund looks solid, but he could top it up a bit if needed..
If a guy already has an emergency fund that has the 3 months, there is no reason to top it off, unless he might anticipate that his expenses had gone up so that the amount that he had no longer would cover 3 months of expenses. Otherwise there is no need to top it off. On the other hand if you are referring to putting some extra money in reserves, then that is a bit of a different story, since reserves are flexible in terms of what they could be used for consumption, buying the dip, as back up to the emergency funds, so yeah reserves have some flexibility, yet if we are trying to invest in bitcoin, and we are a fairly new BTC accumulator, we have to be careful in regards to keeping too much cash and being overly timid about putting value in bitcoin, yet at the same time, each person does have to get used to bitcoin, so you are correct in your inclination to error on the side of conservatism (whimpy) in regards to the bitcoin investment rather than overly aggressive... the level of aggressiveness can be increased later down the road as the person gets more used to investing in bitcoin.
That makes sense, so If the emergency fund already covers the full 3 months, there is no need to top it off unless expenses have gone up. I also see your point about reserves they are more flexible and can be used for different purposes, including buying dips or as backup....... When it comes to Bitcoin, I agree it is smart to avoid being overly cautious or overly aggressive. Starting steady and adjusting over time as comfort grows seems like a good approach.....
..Overall, he should thinklongterm
What do you mean by "long term"? Are you talking 4-10 years or longer? I think that the guy that I specifically provided would likely have at least a 10 year time horizon, yet some people do get anxious in regards to their wanting to reach overaccumulation status or fuck you status, and I have difficulties seeing this particular guy on his particular budget being able to get to overaccumualtion status in much less than two full cycles, even if he gravitates towards more aggressiveness. Yet it could depend on his goals too.. since if he merely wants to continue with a $25k per year income, then it could be the case that he might be able to get close to reaching that or even superseding it in less than 8 years.. especially since he already has an investment portfolio that is two years of his current income... so this particular guy is in a pretty good position relative to his current income, and he has not even added bitcoin into the mix, yet..
Yeah, when I said long term, I was thinking in that 8 to 10+ year range , at least through a couple of Bitcoin cycles. I agree, this guy is in a strong position already, especially with an investment portfolio worth two years of his income..... If he stays consistent and adds Bitcoin strategically, he could definitely reach or even surpass his income goals over time. Of course, it depends on how aggressive he wants to be and how patient he is with the process....
.......Bitcoin’s volatility brings risk, but also huge upside. No need to go all in, just in enough for it to matter.
You seem to be saying that bitcoin is a great asymmetric bet to the upside, and I agree with that.
I do also recognize that a lot of folks consider volatility and risk as if they were the same thing, and surely anyone who greatly budgets into bitcoin could run some risks if he were to need to cash out during a period of great bitcoin downward price moves, yet each of us should be putting systems in place in which we are continuing to buy bitcoin whether it is up, down or sideways, so we would continue to buy when the price goes down, yet surely we could end up running ouf of money during such downward volatile time, and then get into a bad situation, so I will agree that sometimes unexpected things happen, and we do not sufficiently prepare for the unexpected things, such as loss of a job and sometimes it could be based on things somewhat out of our control, like health or an accident or genetics.
By the way, for sure, I gave you an example of a guy who was already in a pretty decent situation with a decent income and 10 years worth of investing, so he might be too perfect, and we might imagine that there are people with way worse finances, even if they might be trying hard to sort out their affairs. I will concede that guys likely come to bitcoin with very messy finances, and so for sure they have to work with what they got, even though similar principles will still apply, yet some guys might be overwhelmed with debt so they have to deal with their debt or they might not haver any investment at all or any lump sum possibilities, and sure I understand that having lump sums from time to time is a bit of a luxury, and at the same time, guys who are more organized and systemic in their bitcoin investment and cashflow are going to be in a better position to take advantage of any lump sums that they might get as compared with guys who might have worse systems (or no cashflow management systems) in place.
Part of the reason that I gave the example the way that I did is in order to be able to show situations in which guys might need to figure out how to consider all three of their accumulation methods 1) buy right away (lump sum) 2) DCA and 3) buying on dips.
Yeah, I really like the way you broke that down ,especially how you emphasized the need for systems. A lot of people underestimate how important it is to have a plan for different scenarios, not just the ideal ones. You are absolutely right that not everyone is starting from a clean'
position like the example you gave. Some folks are juggling debt, low income, or unstable cash flow and for them, even getting started with Bitcoin takes a lot of effort and discipline.....
Having all three accumulation methods , lump sum, DCA, and dip buying in the set of options makes sense, especially if you are financially organized enough to use them effectively. But as you said, that level of control only comes with having some structure in place first. I think the big takeaway here is that long term success with Bitcoin isn’t just about how much you invest, but how consistent and adaptive your approach is especially during unpredictable times......