[housenuts]

i think you're arguing two separate things.

if you are going to invest $500 monthly that seems like a fine way to go about it. it would however be bad if you were making 5 $100 transactions with an ETF and getting dinged $10 for each transaction cost. but if it were a mutual fund and no transaction costs, then so be it.

but i think this is the argument for it being a suboptimal psychological crutch. correct me if i'm wrong.

Person A has 24k.
He's a bit of a timid tommy and isn't sure which way the market is going to go, so he doesn't want to invest all his money and have the market take a nosedive on him. He wants to get some money in there, but he wants to do it conservatively. So he goes for the DCA approach. Over the next 2 years he will fund his account with 1k each month. This ensures he's buying more when it's low, and buying less when it's high.

Person B also has 24k. He wants to invest all his money right away, and isn't worried too much about changes in the market, because he knows eventually he's bound to make a profit. So he diversifies, and invests it all at once.

Who do you think will do better?


So in conclusion, if you have a lump sum, get it in there. If you don't have a lump sum, and want to say invest 10% of your paycheck each monthnthen DCA is fine. And beware of transaction costs if you're constantly funding your account because they will eat you up if you're just adding small amounts.