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Comment by netinstructions | Hacker News Reader

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day.

But aren't the transaction fees (at least for Bitcoin) something like ~$2 per transaction? So you'd end up only investing ~$820 instead of the target of $1000 and losing the rest. Am I missing something?

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Another problem with DCA is that it's a classic case of "timing the market". If, over the course of those 3 months, the value of the asset you're purchasing consistently increases, you'll 'lose' money in the sense that your dollar will have less and less purchasing power toward the end of the period.

There's a good discussion of this strategy on the Bogleheads wiki: https://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar...

tl;dr: If you think the market will continue to go up in the short term, lump sum will always beat DCA. A better rule, however, is: do not try to time the market. Just invest when you can.

Thank you, this is a great insight.

> A better rule, however, is: do not try to time the market. Just invest when you can.

I'm not sure if I understood this one correctly. Is it like, instead of trying to find the best time to invest, like waiting for something huge to happen, just invest every now and then when you are able to do it. Is that it?

That's right. If you have $100 sitting in your chequeing account to invest, better to invest it now.

Most people get paid biweekly or twice per month, so it would make sense to just invest when you get paid.

Which means, taking say $100 out of each paycheck and investing all of it on that day. You're not timing the market then, the money wasn't available prior to that. You're not paying attention to the price, you're just getting the price on that day.

This is what dollar cost averaging usually means... assuming prior money was already invested.

But when you have a lump sum, instead of putting it all in on that exact day you can DCA over a short period of time, like 2-5 days or 3 weeks. This is basically averaging over that period which is better than the chance of just happening to pick the wrong day to buy.

>A better rule, however, is: do not try to time the market. Just invest when you can.

Well, that rule assumes two things:

1. That you're investing for the long term (i.e. retirement), and more importantly,

2. That you're investing in the stock market, which has a very long track record of going up more than it goes down, such that it always goes up over the long term.

That second one, in particular, is much more of an open question when it comes to BTC.

Yeah I prefer my way: Invest mostly in things that you would double your investment if they halved in price but that you think that that outcome is unlikely. That way if it halves in price, you get 3x the quantity, but you don't really miss out on a short term bull run because you're in for a significant amount.

You're somewhat missing something. Take the Exchange Gemini: I send USD to Gemini and then I purchase BTC on Gemini and am charged a 0.25% fee on my purchase. So far I haven't paid any transaction mining fees and it's because Gemini isn't actually settling these transactions on the blockhain.

Now, if I were to move these coins off Gemini, then I would pay the mining fee of $2. However, I could just wait 5 weeks and only pay that once, since the fee doesn't scale with the transaction amount.

Leaving the coins on the exchange for that long requires an exchange-hack-or-failure cost averaging analysis to balance things out.

Fair, but I doubt the probability of the exchange getting hacked in 5 weeks is meaningful. I agree that you should never leave your coins long term on any exchange, just to be clear, but there is a reasonable amount of risk you can take.

> I doubt the probability of the exchange getting hacked in 5 weeks

Depending on the exchange that probability could easily be >> 0.0.

Exchanges being hacked or absconding with the coins are all too common, ignoring that possibility is not a recipe for a happy ending.

If you create liquidity on GDAX (any maybe Gemini too) you don't pay a transaction fee. (Though you still pay mining fees.)

I think you're referring to the blockchain transaction costs, and thus assuming each daily purchase of bitcoin is transferred on the blockchain. Another approach would be to accumulate bitcoin in an exchange account (off-blockchain), and withdraw the balance to your bitcoin wallet (i.e. on-blockchain transaction), on a less frequent basis, perhaps monthly. That would mean more like ~$990 invested.

the fees depends on the exchange. In this case are 0.26%. Even if you dont use Dollar Cost Avg you loose those fees anyway

You're right. All these investing "strategies" ignore these costs.

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