If a person has lump sum available, such as $1k to get started, and maybe he has an income in which he can buy $100 per week in bitcoin, then with the extra $1k, he does not need to invest through DCA, he could buy right away and/or he could buy at the dip (if the dip happens), so he has choices of the three different styles, and DCA is not always better if you already have a lump sum of cash come available to you. One of the reasons that so many people use DCA is because it is much easier to tailor some kind of a buying amount that goes along with their regular income coming in and their expenses, and so DCA also will allow an adjustment every week or whatever period that a person chooses to buy bitcoin under that kind of an approach/practice.
I like to think that DCA is the best method or strategy in almost every situation, even if a person has lump sum it just depends how disciplined and aggressive the person is with his DCA. If a person has $1K and he decides to DCA $200 for five weeks and another with the same amount just lump sums immediately, you’ll find out in the end that the one who DCAed was able to accumulate more than the lump sum even if it’s a bit.
I think lump sum is most beneficial in times of dip, I think that’s the only moment when lump sum is better.
Assuming the $1K didn’t come available at a time of dip, would it be better to wait ? How long would one have to wait losing valuable time and opportunities he could have accumulated more. And sometimes while waiting for a dip and price moves to an ATH even if there’s a correction after, there’s a possibility the dip might still be high compared to the time you had the sum available and decided to wait.
That my friend is a very solid way to look at the DCA strategy. DCA sure does take away the guesswork from the equation, additionally, it also prevents people from missing out on potential opportunities while sitting around waiting for the perfect buy. With lump sum, one is basically actually gambling that the moment at which they buy is actually gonna look good in hindsight. If you're lucky enough that it actually lines up with a dip, good for you, and if not, you'll simply get stuck, second guessing yourself and thinking about the next move to make while the train just leaves you behind.
What you pointed out about waiting for the dip is one pitfall that a lot of investors often fall into. You might be sitting on cash for weeks or even months hoping for a perfect opportunity and then suddenly your long awaited dip comes above the level you could've already bought at. And this is exactly why the DCA strategy is way more safer and better than every other strategy, and this isn't always because it always win on pure maths, buy because it completely eradicates the risk of missing out or capitalizing on potential gains/opportunities.
DCA is not necessarily a good idea (or strategy) if you already have the money available. That is why it is good to consider whether to buy right away or to defer.... DCAing in a situation in which you have the money already is a form of deferring.
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Yeah I get that situations and circumstances can affect the method or strategies an individual employs to use, It’s also important to consider all three strategies cause they’re also good if not they wouldn’t be considered strategies and also a good mix is good but I’ll still say in 70% of those situations Dollar Cost Average has the best results.
But at the end of the day an individual has to choose what’s best for him and his financial status.
Sure DCA tends to be the best and the extent to which a guy DCAs versus employing some other strategy depends, but I still provided a specific example for a guy with a $30k income and a usual contribution amount of $100 per week and at the same time, he came accross a bonus amount of money of $5k. I said that it would be different if the guy is brand new to BTC or if he had been investing for a couple of years or even if he had been investing for a couple of cycles. The way that he treats the bonus $5k is going to likely differ in each of those circumstances, and DCA might not be his approach and it might not be the best aproach, depending on how long he had been investing and his other personal circumstances, yet I had given specific circumstances, and you continue to assert that DCA is best, even though, sure, you moved a little bit away from your earlier consideration but you did not attempt to grapple with the hypothetical that I provided.
The one who lump sum will do better if the price ends up going up, and the one who DCA'd will end up doing better if the BTC price ended up going down.
Even if the guy has suspicions about the potential BTC price direction, mostly he does not know in advance if the BTC price is going to go up, down or sideways.
I think lump sum is most beneficial in times of dip,
That is not called lump sum. That is called buying the dip.
Sure if you get a lump sum and the BTC price had been dropping for the previous week or two, and you think that the dip is not over, then sure, you could be correct that some advantage comes from buying as the price is dipping, even though the price direction could reverse at any time.
Yeah that’s why I say it’s most beneficial at the dip, when you lump-sum at the dip so that’s called Buying the dip? And not lump sum, I think it should be both cause you’re buying with a huge amount a lot more than you normally DCA, my thoughts though you have the better experience and understanding.
What about the example I gave? The guy has a specific amount of $5k that came available to him. Is he going to hold out for a dip, and if so with how much of his money? How is he going to be able to buy extra on the dip unless he is holding out in advance?
Sure it is possible that the $5k could come to him right when a dip is happening, but that is a different story from the guy who holds back in order to be able to potentially buy the dip later.
If the goal is to accumulate more bitcoin faster and cheaper at all times DCA gives us that, yet there are rooms for other strategies and this is because investors differ and their financial strength differs too,
My example already attempts to account for those kinds of considerations, so all you have to do is plug in the strategies to the extent to which you think any of them might be feasible beyond just going with DCA as a default... which that hardly makes sense, since in some sense DCA could be considered as a strategy that buys bitcoin right away as soon as the money comes available, but if try to apply DCA to a lump sum, then you are deferring, and what would be the particulars? You going to DCA the $5k over the next 3-6 months? or over the next week? or spread it out over a year to double your regular $100 per week DCA that is already in existence.
I think people who can afford to lump sum
What the fuck? My example is not talking about whether anyone can afford to lump sum. The guy received a lump sum. Usually, he was just investing $100 per week, but all of a sudden he received some extra money. This can happen to anyone who might have income coming in regularly, then maybe every once in a while he might receive more than his usual. Sure, maybe he just receives an extra $500, yet I made the example BIG in order to attempt to illustrate a point in terms of a guy with a $30k per year income who is investing $100 per week into bitcoin is already investing around $5k per year into bitcoin, so when he gets the extra $5k, then it is like one year's worth of DCA. So it stands out. Many times the lump sum might not be as large, yet the same considerations can apply whether the lump sum is $5k or $500 or maybe he just gets an extra $50 that comes in.. so at that point he has three possible ways to consider the extra amount 1) buy right away or 2 defer by a) time (DCA) or b) by price (buying on dip).
I already gave the example, and sure some guys receive extra pay (or lump sum) amounts more frequently than others, yet if they are already setting themselves up to buy bitcoin on a regular and frequent basis, then presumptively, they already have their expenses taken care of if some extra amount of money comes in.
If a person is new to investing and creating and building up his cashflow management systems and his back up funds, then sure he might still be figuring things out, but we are presuming that a guy who is investing into bitcoin is ongoingly striving to put himself into a place in which he is going to be able to afford to use extra money to buy bitcoin.
And, yeah, I am not going to take for granted that everyone has a high discretionary income, yet if there are situations in which guys get extra money then presumptively they are not going to necessarily be inclined to use that to buy other things rather than to invest into bitcoin, since we might be considering that guys who are looking to invest in bitcoin are maybe searching for opportunities to get more discretionary income by increasing their income and/or by cutting their expenses.
and wouldn’t mind are those who have gone far in their bitcoin accumulation or those who have a lot of discretionary money at their disposal and is still accumulating consistently and aggressively as possible on the DCA. There are cases where an individual’s lump sum is just someone else’s regular DCA.
Again? So fucking what? I would think that part of the reason to improve your cashflow management systems and practices is to be able to improve what you are able to do within what you got. If you can improve your situation and/or increase your discretionary income, then that is going to be better for you, but the mere fact that some folks have it better should not be considered to be very relevant in terms of your own thinking about trying to maximize what you are able to do within your own circumstances (financial and psychological).
He might not consider it a missed opportunity if he had already been buying for two cycles or more.
Surely the shorter time that he has been in, then probably he would be better to error on the side of buying right away, so even in my case of $5k, he might invest $4k right away (like over the space of 1-2 weeks) and then maybe he saves $1k for buying on dips, so then he might have 3 orders of $333 each for every 5% that the BTC price goes down, and with the expectation that he might end up holding parts if not all of the $1k rather than investing it at dip prices that might not end up happening. He ultimately figures out an approach that is based on his own psychology and his finances, but it also depends on how much BTC he had already accumulated (and when and how he made those prior BTC purchases).
time.
I totally agree with you if the individual has been accumulating for two cycles he must have accumulated a reasonable amount or already at over accumulation stage depending on how whimply or aggressive he has been, and must have garnered enough knowledge to know when best to lump sum or wait for dip or not. The strategy you used as an example with the $5k is also good mix of strategies.
In the past I have given some examples that show that it could depend on if a guy had invested 5% of his income, or 15% or 25% or some other quantity, and surely the higher the percentage, then the more likely that the pay off could have had been good, yet it still seems difficult for most guys to get to overaccumulation status in less than a couple of cycles unless he had already been investing prior to bitcoin and he had been in a position to frontload his bitcoin investment. Otherwise, getting to over accumulation status in merely two cycles would have had been difficult, even for a guy who would have had been investing close to 25% of his income into bitcoin.
Bitcoin still remains a great place to put value (probably amongst the best of places that is widely available to everyone and anyone around the world who has a discretionary income), yet surely the lower that a person's discretionary income, the more difficult it is going to be to invest high amounts into bitcoin, so it will take longer in those cases, and surely someone who is living without hardly any discretionary income, they are frequently be tempted to dip into their bitcoin investment even if they bitcoin investment had not been a lot and had not been given adequate time to grow.
By the way, you bring up some good points, yet you also seemed to have had spent a lot of time fighting with the hypothetical and not trying to engage with the actual example rather than just largely attempting to repeat your earlier points, even though you did seem to take into account that there might be some instance in which buying right away or buying on the dip might be preferred to DCA.
DCA is effective in the process of averaging against volatility and putting purchases in an ordinary income stream, however, when you have a lump sum, it may be worthwhile to buy on the downside or buy more actively. It all depends on whether you have an effective plan and with a clear plan, you should not touch on monies that are likely to impact on your necessities. Basically, both strategies can be applied using the same capital, it is primarily a matter of timing, risk-taking, and disciplineness when using discretionary funds.
The discretionary income to be used depends on the level of your comfort and not even about the market environment and If you say buying on a Lump sum is worth while buying on the down side then to me you are describing buying the dip and not buying with the lump sum, because talking about buying with the lump sum has nothing to do with the market conditions but rather an investor decision to buy immediately with the available Lump sum amount irrespective of the market conditions,
So, buying the dip and lump sum are not the same thing, it's just that people do their things differently. Some may decide to invest their money once, while others will wait for a dip. But, in the end, it will depends on how the person thinks and the kind of risk they are willing to take.
Lump sum for me is a good strategy no doubt, but it looks like it gives little room for discretion, because sometimes i think an investor should be investing on a gradual basis since the investment is for long term basis especially bitcoin. Although some investors can decide to lump sum when there is a dip, but why not use the DCA method instead and increase your lot size hence you notice a dip.
You sound confused about the idea of lump sum.
Just think of the example of a guy who makes $30k per year, and he invests $100 per week into bitcoin.
At some point, he gets an extra $5k. what is complicated and restrictive of it? If the guy got a lump sum of money then he has options, and it is not necessarily a best option to defer (or wait) to buy, yet he does not have to invest all of it right away either.
If he had already authorized himself to put it into bitcoin, then he can put part of it right away and he can defer by time (DCA) or by price (buy on dip), and he can chose exactly how much he wants to allocate to each category. He also can choose the terms upon which the purchases woud be made (and with how much, whether he divides it up into 3 parts or maybe he divides it into 50 $100 parts.
.And then also it’s not always about the size of one's investments but the discipline to keep going and not quitting halfway, that’s where the real success comes......
I totally disagree with you here. The size of your portfolio will surely determine the amount of benefit you will get after a long period of time. The main reason for consistent accumulation is because you want to have a sizeable amount of Bitcoin in your portfolio.
Dont forget, you might be consistent investing peanuts into Bitcoin while someone who lump sum with a huge amount 3 times in a year, in a 5 year or 10 years interval, there is every tendency that he/she will reap more than you. Your example is confusing. if a person is investing in lump sums three times a year, is that because he is trying to time the dip? or is he receiving money only 3 times a year?
I don't see how he is necessarily going to do better, even though it could be true that a guy who front loads could do better than a DCA buyer, except if he front loads at the top of a price wave, then the DCA'er will end up doing better.
Over the years it has not necessarily been easy to determine dips, but surely we can look back at the charts and see various times that it would have had been good to invest heavily in bitcoin, yet while we are going through the process, it is not necessarily easy to jump in with a lump sum, and not very many people have lump sums that they are ready, willing and/or able to throw into bitcoin, even if the price wave might seem good at the time.
You have not been registered on the forum for very long (only a couple of month).. but you write like you have had been in bitcoin longer. Have you or are you just speaking hypothetically about your ideas about investing into bitcoin. Maybe you want to give a hypothetical to show how a guy might plan to do DCA and/or lump sum buying and/or whatever other strategies that you had in mind?
Like even right now. How a guy proceeds is going to depend on a variety of factors. Are you suggesting that he gets started or he waits? or something else? What about you? what have you done?
Surely if a guy has been investing in bitcoin for a while, he might be considering switching his style, but it may or may not be good to move away from a practice that involves ongoing buying, especially for guys who have only been buying bitcoin for less than 4 years, yet of course, the more that they had been able to front-load their investment, probably the better, but even some guys who had been front loading their investment for 2-3 years might not really be in a position to change what they had been doing, even if they had already been able to accumulate a decent amount of BTC at lower prices..
Just like the figure that JJG used $5000. I can choose to lump sum with $1000 right away as a new investor who just want to start his bitcoin investment at has $5000 on ground as my discretionary income. I can use $2500 for weekly DCA by spreading it out in various weeks and use $700 to keep for buying at the dip and add the remaining $800 to my emergency funds while I continue building it.
I don't necessarily agree with your allocations or your trigger points, but at least you grappled with the $5k and you figured the extent to which you might apply the $5k to each of the categories, even though you did not need to use all three categories, but at least you should consider all three possible ways to accumulate bitcoin... and yeah, of course, you threw in your concern that you want to add $800 to your emergency funds (or it could be back up funds), and by the way, if you allocated $700 for buying dips, that money is still serving as a back up until you actually use it for buying dips, so you could end up reassigning the amount later down the road - which is another advantage to holding back and reconsidering how you might employ some of the funds, even though with other funds, you already started to implement an action plan.
By the way. Let's say that instead of having a $30k per year income, you were to have something like a $20k per year income, so your income is ONLY 2/3rds of the hypothetical, then maybe you would consider that your bonus would only be around $3,333.. So you should adjust the hypothetical to your situation.