Even though we are encouraged to use dca method to invest especially since we are new to bitcoin investment, I think it is imperative we recognise that other methods of investing are in existence. So that should we be called upon to lecture and educate others outside this forum, we won't be giving them half baked information. That being said DCA is not the only method to invest in bitcoin. Please take note and take correction.
Sure. Even a newbie might have lump sum amounts available to him or he might come across lump sum amounts from time to time, so if he comes across lump sum amounts, he might have to figure out the extent to which he is going to 1) buy right away, 2) defer by time (DCA) and/or 3) defer by price (buy on dips).
sometimes there is no justification to differ investing, so frequently if a guy is buying bitcoin every time he gets paid, he is not deferring he is buying right away as soon as he figures out the extent that he has enough money available to invest.
DCA can also work quite well for guy who is still early and just getting used to how much money he has available for investing and/or for putting into his back up funds. So it can take a bit of practice to get used to how aggressive a person is able to invest into bitcoin without over doing it, so if the guy figures out that he can mostly do $100 per week, yet there will be some weeks that he can only do $60 and there will be other weeks that he might be able to do as much as $170, so then he can see a kind of pattern and if he is getting his back up funds to a comfortable level then he might have extra money come available due to his not having to add to his back up funds, and then maybe he is working his ass off, and his boss decides to give him a $1,500 bonus.. and usually, he would have just spent the $1,500 on a car or a motorcycle or a phone/computer, but now that he has bitcoin.
He might realize that he is able to invest $1,200 of that bonus into bitcoin, yet he still might be faced in figuring out if he should buy all right away or if he might defer with buying on dips and/or adding to his DCAs in the coming weeks..
There is no real right or wrong answer, even though there are trade offs to each of the techniques that may or may not end up paying off depending on what the BTC price does after exercising such option(s), and the guy may or may not be willing to figure out how to weigh the trade offs until he practices a few times, yet at the same time, he realizes that on average, his bonus had resulted in right around 12x the amount of his usual that was available for his weekly BTC buys, and he feels that it is good to have options, even though not always easy to decide and sometimes a guy might just purposefully divide the amount that he has into three parts $400 for each part and to practice with each one of those parts within their definition, and see how it feels to actually apply theory of each three to practice which might cause him to be better informed how he might choose to make his allocation differently if he ends up getting another bonus or otherwise come across some extra money all of a sudden in the future.
Thank you sir for taking your time to educate me on this matter. You know I have only limited myself to the practice of the dca method. I haven't had the privilege to apply the theory three practice. Hopefully in the future when I get lump sum, I'll divide it into three parts and practicalise the three practice so I will be informed and gather knowledge. For now since I only depend on my monthly income,
I will continue with my differ technique (DCA) since I like buying weekly.DCA is not a deferring technique if you are buying whenever you get paid (such as weekly or whenever you figure out how much money you have remaining after figuring out your expenses). However, if you receive a lump sum payment, like in my earlier example, then all of a sudden you might have 12 weeks or more of your regular DCA amount sitting in front of you. In that case, if you were to spread out some of your lump sum over time, then you would be deferring your buy, and there is nothing wrong with that.
So the kind of DCA that a guy does when buys bitcoin every time he gets paid, such as once a week, is not deferred.
however the kind of DCA that a guy does if he receives a lump sum, and maybe he decides to spread it out for 4 weeks or more, then that would be deferred,.
Let's go back to the example that I created. Usually you plan to buy $100 every single week, except some weeks you either don't get paid enough or your expenses are higher, so you might ONLY have $60 to buy bitcoin in those weeks, and then there are some other weeks that your pay is very high or your expenses are very low, so you are able to buy up to $170 worth of bitcoin.
So after you had been engaging in that kind of system for several months, maybe 6 months, all of a sudden you go to work and you hear that on the next Tuesday you are going to receive an extra $1,500 because the boss is feeling generous or there was some kind of a profit sharing arrangement that had caused you to earn it... so yeah, you are very excited, yet you figured you had been being a bit skimpy on building your back up funds, so you decided to add $300 of that to put into your back up funds and then use the other $1,200 to buy bitcoin.. and since you want to test out each one of the systems with your bonus pay, you figure that within a day of your receiving the deposit, you are going to buy $400 right away (within that same week), and then you with the buying on dip portion, you are going to set up to buy $100 ever time the bitcoin price drops 4%, starting from 4% lower than whatever price that you end up making your first buy with the $400. So then you figure that you would buy at 4%, 8%, 12% and 16%. If the BTC price goes up rather than down, you will rethink the matter if the BTC price goes up 16% from whatever price you buy the $400 next week... otherwise you are just going to keep those buy orders set. Regarding the DCA, you decide that you are going to add $50 to each of your already scheduled weekly DCA buys no matter whatever the DCA amount that you buy for the week, you are going to add $50 for each of the next 8 weeks.
Something like this could happen at any time. Let's say that you receive a gift or you are given a side job that is going to pay you some extra amount that is beyond what you usually make.
You've got a spot on approach to DCA and Lump sum investing. Investing a particular/regular amount of money every week, based on the funds you've got available, could be seen as a form of DCA. However, when the individual actually receives a lump sum, let's say $1,500 bonus, he then has more flexibility on how he wants to continue investing.
Using $1,200 to immediately buy Bitcoin and allocating the rest to backup fund could potentially turn out to be a thoughtful decision to make about how to use your unexpected windfall. Again, choosing to increase your regular weekly DCA amount by $50 for the next 8 weeks could also turn out to be quite a great move as it could be seen as a great way to gradually invest the lump sum, and still maintaining your previous regular accumulation routine. What I love most about this approach is the fact that it gives folks the ability to be able to balance their desire to invest the bonus using their ongoing and already existing investment strategy, thereby saving the investor the stress of trying to develop another strategy or approach to invest the bonus without messing with the already existing strategy.
It's also worth noting that a great way to boost investments and potentially accelerate your financial goals can be through unexpected windfalls like gifts, side jobs or and extra income. When folks come up with a solid plan in place on how to use these funds to invest, they can potentially make the most of these opportunities and most importantly, remain focused on their long term goal.