This is very interesting and I was quite surprised how the outcomes were fairly similar between the two approaches. For my investing I use both strategies in different situations. This is influences by which trading platform I am using (i.e. their fee structure and whether I can buy fractional shares) and also the nature of the equity I am buying influences by approach. For example, my SIPP (and ISA) is in a platform where I pay £4 per trade and I cannot buy fractional shares so I tend to save up capital and then use the lump sum to buy a decent sized allocation when I feel the price is within my range of acceptability. I may come back an buy more later but I hate overtrading on that platform due to the fees and by its nature my SIPP is 'buy and hold'. In T212, I have secondary account which is really where I experiment and try different things and due to the fee structure and fractional shares I but a lot more US shares there and all with a DCA approach. Thanks for the article.
Perhaps I could have made the graphic clearer - if you DCA - and are still DCA'ing - your returns are often lower than a lump sum approach (bottom right graph).
If you had DCA'd for a while, but then stopped DCA'ing (for example, if you had built up a fund but then left it to continue growing), then the returns look much more like a lump sum, as the period of DCA becomes a smaller proportion of the total investment time period (bottom left graph).
However, I also want my funds to be buy and hold with very little interference.
This is very interesting and I was quite surprised how the outcomes were fairly similar between the two approaches. For my investing I use both strategies in different situations. This is influences by which trading platform I am using (i.e. their fee structure and whether I can buy fractional shares) and also the nature of the equity I am buying influences by approach. For example, my SIPP (and ISA) is in a platform where I pay £4 per trade and I cannot buy fractional shares so I tend to save up capital and then use the lump sum to buy a decent sized allocation when I feel the price is within my range of acceptability. I may come back an buy more later but I hate overtrading on that platform due to the fees and by its nature my SIPP is 'buy and hold'. In T212, I have secondary account which is really where I experiment and try different things and due to the fee structure and fractional shares I but a lot more US shares there and all with a DCA approach. Thanks for the article.
Perhaps I could have made the graphic clearer - if you DCA - and are still DCA'ing - your returns are often lower than a lump sum approach (bottom right graph).
If you had DCA'd for a while, but then stopped DCA'ing (for example, if you had built up a fund but then left it to continue growing), then the returns look much more like a lump sum, as the period of DCA becomes a smaller proportion of the total investment time period (bottom left graph).
However, I also want my funds to be buy and hold with very little interference.