There seems to be some confusion between dip buying and DCA and I wanted to clarify by giving an example of how they differ and what happened to me after the ‘08 stock market crash. These strategies can be used together but they are different.
I’m an old fart to most of you, not a boomer but GenX and my first exposure to trading and investing was the 2000-2001 .com crash that happened soon after I graduated from college. There are a lot of similarities between that space then and the crypto space now and a lot of good lessons to learn by those interested. The internet did not die but came more mature and projects had to show their worth and value to succeed. Lots of money has been made in the tech space since that crash.
I was fortunate enough to liquidate most of a 6-figure stock portfolio prior to the ‘08 crash but many people I know did not and ended up selling near the bottom, including my parents who were nearing retirement.
I began a dip buying strategy in mostly broad ETFs after the brunt of the ‘08 dump was over (which is only apparent in retrospect). The thing is, I only got about 2/3 of my liquidated portfolio $ back in the market before it started to climb again. I was so shell-shocked after thar dump that I refused to accept we were through it and kept the rest of the cash waiting on another big pullback which never came. I was of course DCAing in my 401k but failing to get that money back into the market cost me well over $100k between then and now. I just recently deployed the rest of that cash which has been sitting in my IBKR account and some of it went into the crypto space with BTC < 21,000 and I plan to move about 10% of my portfolio into this space at these levels over the next few months with dip buying AND DCA.
My point is that dip buying with reserves can be an excellent strategy but it does not replace DCA. Dip buying ultimately has some dependency on market timing and prediction while DCA does not. The single greatest thing about DCA is it saves us from our own emotions which routinely cause us to make bad investment decisions and studies have shown it is the best strategy for most investors.
It is really exciting to see so many (I assume) young people so excited about investing for their future and I think it is a good thing and I wish more of my generation did. Many who got burned bad by the .com crash never did and are paying the price today as we inch closer to retirement. I do think many of you would benefit enormously by diversifying beyond crypto and applying these same strategies in other markets as well. Investing doesn’t have to be all or nothing and smoothing out the volatility can be great for ones psyche.
Best of luck to you all, your passion is contagious!