Stock Market League › Challenge: can you beat DCA?
Challenge: can you beat DCA?
You have €10,000 and a real 12-month stretch of the market, without knowing which one. Buy whenever you like. The machine invests €1,000 a month for 10 months, no matter what (that is DCA). Who ends up with more? Three rounds: win two and you win the challenge.
You buy at the close of the month you see (price indexed to 100). At most 8 orders. Whatever you haven't bought by the close of month 10 is bought then. Valued at the close of month 12. No fees or dividends.
What the challenge teaches
With the S&P 500 since 1950, investing everything in the first month beat spreading it over 10 months in 72% of 12-month stretches (910), because markets rise more often than they fall. But in the rest, especially right before a sharp fall, spreading it out avoided big losses: DCA reduces the risk of getting in at the worst moment.
Frequently asked questions
What is DCA?
Dollar cost averaging: investing the same amount at regular intervals (for example, every month) regardless of price. There is no need to decide when to get in, and you buy more cheaply when the market falls.
Is it better to invest all at once or gradually?
With the S&P 500 since 1950, investing everything in the first month beat spreading it over 10 months in 72% of 12-month stretches (910), because markets rise more often than they fall. But in the rest, especially right before a sharp fall, spreading it out avoided big losses: DCA reduces the risk of getting in at the worst moment.
Is the data real?
Yes: real monthly closes of the S&P 500, the IBEX 35 or the MSCI World (in points, without dividends). The stretch is picked at random and only revealed at the end.
Game with historical data and virtual money. Past performance does not guarantee future results. Not investment advice.