Hacker News Reader

Comment by jeffreyames | Hacker News Reader

Don’t try to catch a falling knife.

Catchy phrase, but what is actually wrong with dollar cost averaging through a downturn? It seems to be the only effective way to invest for the long term.

Yea would like to know any cons in this strategy. I’m dca’ing a portion of my paycheck every month. In Canada we have tfsa’s which allow for a certain contribution per year that is tax free if you get gains.

For the last few months my monthly contribution gets swallowed up by the losses and the balance hasn’t moved lol

Why would you want buy something at a higher price than a lower price? I only care about high prices when I am selling.

There's a difference if you DCA a broad index and a single thing.

The broad index will, most likely, be positively skewed and still be around in 20 years. DCA makes a lot of sense.

The single stock may just go bankrupt, or become smaller and never recover (think Kodak or Nokia). DCA does not make as much sense.

(Disclaimer that I own some NET so I don't necessarily believe this is the case for them but also am probably biased). You can't really know it's a downturn until it ends and pops back up. Otherwise it's just their downfall. If a stock is going to just drop and continue dropping until bankruptcy, or plateau forever at a low point, then cutting your losses early would be better. But no one can really be sure which way a stock is going to go in the long-term. If you believe the dip is just a temporary thing and end up being correct then yeah it's a good play. If you end up being wrong it's just a slow way to lose money.

Best way to mitigate that risk is to have some inside information that they're not going bankrupt.

And the best legal way to do that is to be a customer or prospective customer and observe that there are no other ways to accomplish what you want to.

There're a number of beaten-down tech companies that IMHO would pass that test: NET and COIN are two of them, ZOOM, probably SHOP as well (the small businesses I know on them swear by them). I'd stay away from Affirm, Peloton, Netflix and Roblox, though - those are the ones where, as a customer, I just don't get much value out of them and could easily go elsewhere.

https://www.smartcapitalmind.com/what-does-it-mean-to-catch-...

Reply on news.ycombinator.com