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tuctrohs t1_j6cwyg3 wrote

Reply to comment by Picksologic in [OC] Comparison of Lump Sum vs. Dollar Cost Average investing in TSLA (Tesla) stock. by Picksologic

I'm not suggesting that method as a good strategy. I'm suggesting it as a comparison to show the benefit of DCA is a simple, unbiased way.

It won't show a huge advantage in this case, because the main story on Tesla stock was the several huge increases. Where it shows a clear advantage is when a stock has a generalizing trend, but has a lot of volatility.

If you want a comparison to what a naive investor might do instead of dollar cost averaging, rather than a neutral alternative like what I suggested, it could be that each month you put $100 into your bank account, and then look at what the stock did over the past month. If it's been steady, you invest $50. If it's been rising gently, you invest $100, and it it has been rising rapidly, you invest everything in your bank account. And if it has been falling, you invest nothing.

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Picksologic OP t1_j6d3lgd wrote

I just looked up Value Averaging and it suggests investing more when the stock is going down and less when it's going up. I'm curious about your approach.

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tuctrohs t1_j6d4y65 wrote

I seem to be having trouble communicating here. Absolutely, dollar cost averaging is the way to go. The other stuff I'm suggesting, I'm suggesting because it's worse, and if you want to show how good dollar cost averaging is, you need to compare it to something that is worse, but that somebody naive might do. I'm suggesting these for your plot, not for your investing strategy. For investing strategy, dollar cost averaging is the way to go, unless you are a genius or you have a better understanding of the particular market and company, then is available to expert investors.

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Picksologic OP t1_j6d67aq wrote

Ok I gotcha. I'm a little slow on the uptake since I'm just getting into this. I'm now trying to figure out the best way to get the annual averages in my chart. Anyway, thanks for all the guidance.

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