My Takeaways After 3 Years of Dollar-Cost Averaging
I've been putting a fixed amount into ETFs every month since 2021, and since I'm at a point where I'm looking back, I decided to write this up. To start with the conclusion: "nothing special" lol
At first I tried picking various holdings, gave up after two months, and after that just went with only two: S&P 500 and Nasdaq 100. When you add more holdings, you can't manage them and it just makes things more complicated mentally.
Here's roughly what I've learned:
1. Setting up automatic transfers is the answer. If it depends on human hands, you definitely won't do it
2. Losing your mental game in a downturn is the real hurdle. Not looking is a skill
3. I now understand the saying that "whether you kept contributing" matters more than returns
4. Taxes and fees really hit you hard later
Of course, I haven't made amazing returns—it's just about growing my principal. But the hardest part seems to be not getting shaken when people around me keep talking about short-term trading. How much are you all putting in regularly?
9 answers
Agreed, automatic transfers are the real answer. If you have to do it manually, you'll definitely never do it lol
Do you have a source? Can you show with numbers the part about taxes and fees becoming a big burden later?
I really relate to #3. I also saw my portfolio hit -20% in the 2022 downturn and stopped contributing for two months. Now I'm stuck with pointless regret, thinking, if only it hadn't been for those two months... I wonder what it would've been like if I'd just kept contributing like a machine back then. But that's easier said than done—which is probably why people can't stick to regular investing.
But is it really fair to conclude that “only the S&P 500 and Nasdaq 100” are the answer? It’s true those two have done well over the past 10 years, but there’s no guarantee they’ll keep doing so. There’s also the risk of overconcentration in the U.S. The dollar-cost averaging principle is good, but I think stock selection is up to each person’s judgment.