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Comment by carlosjobim | Hacker News Reader

Dollar cost averaging does not work and has never worked. Because most assets have unlimited upside and unlimited downside. A stock or asset can go ballistic for decades like Apple or Bitcoin, or it can fall to zero value.

There are no mathematical ways of winning investing. If it was that easy, everybody would do it. You can only follow your heart and do your due diligence.

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> Because most assets have unlimited upside and unlimited downside. A stock or asset can go ballistic for decades like Apple or Bitcoin, or it can fall to zero value

Spot equities and crypto have limited downside. You put in x, most you can lose is x as you observed. Unlimited downside is not a thing outside certain exotic derivatives.

I didn't mean the upside/downside on your investment, but on the asset. Most investment assets except for bullion can fall to 0. They can also increase without an upper limit, like for example Apple stock. The market being "high" or "low" is not remedied by dollar cost averaging.

You’re misusing the term “unlimited downside” which is why you were corrected. Shorting stock is an example of unlimited downside.

What dollar cost averaging does is reduce short time price risk. The result is the long term.

Even if zero is the bottom, an asset can have unlimited downside. It can go from $0.1 per share to $0.0001 per share and so on without end. Or, with the rational perspective, after 0 the downside does not matter anymore. An asset cannot go below zero, at least the assets I know of. An investment can go below zero and beyond, when you use leverage. But that's a derivative and not an asset, as you've pointed out.

What I mean is that dollar cost averaging is a myth and cargo culting in the world of investment. Let me explain:

Let's say you're "dollar cost averaging" by purchasing an asset during a few years, which fluctuates between $90 and $110. So after some time you have averaged around $100 per share. Now if the asset goes to $5000 next year, what has your dollar cost averaging accomplished? Or if it goes to $3, what has your dollar cost averaging accomplished. Nothing in both cases.

One of the hardest myths about investment, that seems to be impossible to beat out of people's heads even with a sledge hammer, is that there is a proper historical price for an asset and that prices only fluctuate around that price. So you buy when it's under that price and sell when it's over that price. Smart, right? No, it's dumb and the reason why most people trying to invest lose their money. An asset can go down and stay down on a new price level. Or it can go up and stay up on a new price level.

>> Even if zero is the bottom, an asset can have unlimited downside. It can go from $0.1 per share to $0.0001 per share and so on without end. Or, with the rational perspective, after 0 the downside does not matter anymore. An asset cannot go below zero, at least the assets I know of. An investment can go below zero and beyond, when you use leverage. But that's a derivative and not an asset, as you've pointed out.

This is drivel. Being able to tag on infinite 0s after the decimal doesn’t make an asset have unlimited downside, the limit is $0 as you yourself apparently know.

An asset has unlimited downside, in the same sense that you can't move anywhere. See, to move somewhere, you would first have to get halfway there, and to get halfway there, you first half to get a quarter of the way there, and so on, so therefore you can never move from where you are.

X to 0 is an interesting definition of unlimited.

Unlimited in ratio, I guess.

Even then, brokers just show a percent loss of -100%. Our buddy would never see the cool infinity symbol.

It’s too bad they aren’t a fan of dollar cost averaging into broad index funds, I think their older self would thank them.

My investments have always had fantastic results, far above what any index fund could render. I have been forced to involuntary "dollar cost averaging" by having to wait for the next salary in order to invest more. But "dollar cost averaging" is not an investment strategy, it's confusion on the highest level.

Dear Internet Stranger (who is also an amazing investor): Have you considered starting you own hedge fund? If not, are you willing to share some of your best investments in the last few years?

You wouldn't be interested in an answer from an internet stranger. But please tell me how "dollar cost averaging" would help any investor in a real world scenario?

It actually grieves me that your average person is completely unwilling to just take a few days of their life to understand investing and what it is and how they can sensibly do it. Instead they decide to treat it like a casino and chase hocus-pocus like "dollar cost averaging" or "technical analysis" or "day trading".

Every person usually has some area of expertise or interest, or even a hunch. Take that and invest accordingly, long term. There are tools available to make any investment very conservative or very risky, according to taste.

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