DCA not working

Well it depends if you're putting all your disposable income into PMs (not a smart thing to do).
 
ounces said:
I try to DCA but it does no good when POS keeps dropping.
Sure wish it would at least go sideways
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DCA is for people that have made POOR INVESTMENTS and want to justify it to themselves.
Some will say that "i am dollar cost averaging" and others will just go shoot themselves.
Both pretty similar except the person DCA will continue to make bad decisions in other parts of their lives.
Those that DCA tend to be drinkers that gamble (sometimes) on pokies and bet on horses .
 
ounces said:
I try to DCA but it does no good when POS keeps dropping.
Sure wish it would at least go sideways
Click to expand...

I'm not following the logic here. If the price of silver goes sideways you're not dollar cost averaging you're just buying at the same price. If the price of silver drop and you buy more then you're lowing your average cost which is how it's supposed to work.
 
sterling-nz said:
ounces said:
I try to DCA but it does no good when POS keeps dropping.
Sure wish it would at least go sideways
Click to expand...
DCA is for people that have made POOR INVESTMENTS and want to justify it to themselves.
Some will say that "i am dollar cost averaging" and others will just go shoot themselves.
Both pretty similar except the person DCA will continue to make bad decisions in other parts of their lives.
Those that DCA tend to be drinkers that gamble (sometimes) on pokies and bet on horses .
Click to expand...
:lol:
Whoa! While I agree DCA is an absolute mugs game, I'm not sure I'd go that far with my assumptions. :lol:

DCA is for those that don't know any better, or can't do any better ---- then again, for many poor souls, so is PM investment, so it would seem quite fitting.
 
wrcmad said:
sterling-nz said:
ounces said:
I try to DCA but it does no good when POS keeps dropping.
Sure wish it would at least go sideways
Click to expand...
DCA is for people that have made POOR INVESTMENTS and want to justify it to themselves.
Some will say that "i am dollar cost averaging" and others will just go shoot themselves.
Both pretty similar except the person DCA will continue to make bad decisions in other parts of their lives.
Those that DCA tend to be drinkers that gamble (sometimes) on pokies and bet on horses .
Click to expand...
:lol:
Whoa! While I agree DCA is an absolute mugs game, I'm not sure I'd go that far with my assumptions. :lol:

DCA is for those that don't know any better, or can't do any better ---- then again, for many poor souls, so is PM investment, so it would seem quite fitting.
Click to expand...

MY DCA is just under AUD$18 silver per ounce and just on $40 per gram for gold........tell me again how I am doing it wrong.......
Disclaimer - dont play pokies (seriously how boring), last drink I had was New Years Eve 2014/15 and dont bet on horses except Melb Cup.
 
Stoic Phoenix said:
wrcmad said:
sterling-nz said:
DCA is for people that have made POOR INVESTMENTS and want to justify it to themselves.
Some will say that "i am dollar cost averaging" and others will just go shoot themselves.
Both pretty similar except the person DCA will continue to make bad decisions in other parts of their lives.
Those that DCA tend to be drinkers that gamble (sometimes) on pokies and bet on horses .
Click to expand...
:lol:
Whoa! While I agree DCA is an absolute mugs game, I'm not sure I'd go that far with my assumptions. :lol:

DCA is for those that don't know any better, or can't do any better ---- then again, for many poor souls, so is PM investment, so it would seem quite fitting.
Click to expand...

MY DCA is just under AUD$18........tell me again how I am doing it wrong.......
Click to expand...
There are always statistical outliers... :P
An average of $18 and a spot of $19..... tell me how long you've been DCAing for and I might be able to give you a hint. ;)
 
I've also been buying more than a year and have my non-premium adjusted DCA at around $19 and a little change. If buying low is doing it wrong I must have missed something pretty fundamental.
 
Stoic Phoenix said:
DCA for 14 months covering every piece.

I truly want to understand why people think DCA doesnt work.

Heres my take on why it should be necessary but definitely want to hear LOGICAL arguments from the other camp.

I see stacking as any other investment or business vehicle.
As such I feel a true indication of cost of a unit of (insert item here) you must factor in all costs.
For example - A logistics company doesnt just count the cost of wages or equipment when deciding what to charge you.
There is insurances, electricity, rates, superannuation, petrol etc, etc, etc. (All need factored to provide a true reflection of total outlays)
All costs are/should be factored in when deciding what to sell their services otherwise they go busto.

That being said how is stacking PMs really that different.
I need a true indication of costs and profits.
For example - Got an Englehard 1kg for $550....however on top of this are buyers commission, shipping, insurance.
In actuality the bar cost me $630 so goes in the books at $630.
If I then sell this for say $700 + post the total cost is pulled from the book with the profit written in and subtracted from the total cost of all, thereby reducing DCA amount
Please note I do keep a very detailed spreadsheet for tracking, with items in SDB I need something solid to be able to refer to at any given time.
Click to expand...

Firstly, you are absolutely correct - all true costs should be factored in - including lost opportunity cost. This a cost many chose to ignore, but that is another topic.
As for DCA over 14 months... not really a good measure yet. Time will tell.

Now, for a logical argument against DCA (taken from this thread - http://forums.silverstackers.com/message-518674.html#p518674:

wrcmad said:
Psychologically DCA has huge appeal, no matter what happens tomorrow, you can convince yourself that what you did today was the right move. If silver declines between now and tomorrow, or between now and next month, you can consider yourself lucky you didn't put all your money in because now you can buy it at an even cheaper price. On the flip side, if the market goes up, and you have to buy tomorrow at a more expensive price, you can turn this around and think you are lucky because at least you bought some yesterday. You will be happy regardless.

As far as risk is concerned, DCA has no advantage it merely defers risk to a later time. It does, however, lower expected volatility - another phsycological benefit. Even if you use DCA to buy silver over a year or two, at some point you are going to have half of your money in silver, which would make you vulnerable to losing a chunk of it. If you are willing to take that risk in a couple of years, you should be willing to do so today. If not, do you really consider silver a good investment at all? Should you risk any money? Maybe you should lower your allocation to an amount more comfortable or affordable?
Conversely, if you consider silver a good investment, then what is the risk that price takes off while a chunk of your cash is on the sideline? Given you are bullish on silver, taking this risk of opportunity-loss does not make sense? And can actually cost you more.

Now, a simple example of the mathematics:

Let's say that you get a $10,000 windfall. Based on silver's average gains in the past, you figure it's reasonable to expect a one-year return of about 12.5% (about average for silver over the past few decades), which would leave you with $11,250. But you also know that silver is volatile. In fact, it has an annual standard deviation of about 30 percentage points, which means that roughly two-thirds of the time silver will return somewhere between 30 percentage points above (42.5%) or below (negative 17.5%) it's average yearly return. So while you hope to have $11,250 after year 1, there's a good chance you'll end up with as little $8,250 or as much as $14,250, a difference of $3,000 in both directions.

To avoid that worst-case scenario, you decide to dollar-cost average. Let's assume you put your ten large into a bank account that has zero volatility and pays 5% annually and you then gradually move the money into silver over the course of a year. Based on the historical returns, you can expect to have $10,871 at the end of one year. And based on the lower standard deviation (because of the cash), you expect only a $1,681 swing in either direction. So you've given up $379 in expected return ($11,250 minus $10,871), but you've lowered volatility by a lot more, $1319 ($3,000 minus 1,681).

This doesn't mean that there's no situation in which you couldn't come out ahead by dollar-cost averaging. Each strategy wins at least some of the time, but DCA is the statistical "dog", losing about two times out of three. Of course, dollar cost averaging will win if your start date falls right before a dramatic crash or at the start of an overall 12 month slump. But unless you can predict these downturns ahead of time, you have no scientific reason to believe that dollar cost averaging will give you an advantage. So we've got to make the best decisions we can based on probabilities. And those probabilities say that dollar-cost averaging isn't a good way to balance risk and reward.
Click to expand...
 
phrenzy said:
I've also been buying more than a year and have my non-premium adjusted DCA at around $19 and a little change. If buying low is doing it wrong I must have missed something pretty fundamental.
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What you are doing wrong is assuming you are buying low - it is that fundamental.
 
I took a slightly different approach to DCA. I'm an active seller/buyer so If I spot good deals I made some purchases and when premiums increased, I sold. Then when premiums dropped again or some specials, purchased. This type of buying and selling has allowed me to set my stack at ~550oz @ $15.19/oz after all sales included minus fees. This includes several premium items as well and all physical. When I eventually sell the premium stuff, that DCA will continue to move downward. That being said, DCA for the last 5 years is pretty futile. If you just saved for 5 years and bought lump sum now, you'd have a lot more metal. DCA shows its advantage when it starts moving up, but that has yet to materialize.

Continuing to DCA by buying only is still risky and as mentioned deferred risk since there's no bottom in sight. You don't spend it all at one time and spread the risk, but when the direction is down. You still end up down, until it starts going up again.
 
DCA is perfectly sensible when viewed as a means of introducing emotional distance in buying decisions. If you decide to put $100 a week into PMs, you are running DCA as a minor discipline that excludes 'back the truck up' and 'too dear' thought processes (which is where the gambler mentality can strike). If you don't think you getting value, revisit your investment plan.

It's ideal for people with real-world incomes and expenses, and a simple way to avoid living off chips for a week, or running the credit card hot. Not a good plan for a trader; not a good plan for a collector. It would be interesting to see the return (positive or negative) for putting $100 a week into non-numismatic coins, or unallocated silver.
 
hyphenated said:
DCA is perfectly sensible when viewed as a means of introducing emotional distance in buying decisions. If you decide to put $100 a week into PMs, you are running DCA as a minor discipline that excludes 'back the truck up' and 'too dear' thought processes (which is where the gambler mentality can strike). If you don't think you getting value, revisit your investment plan.

It's ideal for people with real-world incomes and expenses, and a simple way to avoid living off chips for a week, or running the credit card hot. Not a good plan for a trader; not a good plan for a collector. It would be interesting to see the return (positive or negative) for putting $100 a week into non-numismatic coins, or unallocated silver.
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Yes. It is merely a fancy marketing pitch for a savings plan, and is inefficient as an investment strategy.... the mathematics doesn't lie.
 
Meh, Im happy going through life wearing the mantle of "Statistical Outlier" :P



Although I see arguments against DCA I havent seen anyone propose an alternative which I would very much be interested in hearing.
 
Stoic Phoenix said:
Meh, Im happy going through life wearing the mantle of "Statistical Outlier" :P
Click to expand...

Me too! Really it just depends on the style of collecting/stacking/flipping etc. I've done the hoarding thing and learned you have to hoard the right thing but even that can change. However active hedging has been working out the few months I've been buying..

I also keep a spreadsheet of what I buy and sell to manage my DCA. There's a simple DCA and a little more complicated DCA. Sounds like we're using the more complicated way.
 
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