61–70 of 125 posts
> The investor purchases more shares when prices are low and fewer shares when prices are high. If you never sell you never lose.
If you didn't sell on mtgox you lost everything.
The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. But aren't the transaction fees (at least for Bitcoin) something like ~$2 per transaction? So you'd end up only investing ~$820 instead of the target of $1000 and losing the rest. Am I missing something?
There's a good discussion of this strategy on the Bogleheads wiki: https://www.bogleheads.org/wiki/Dollar_cost_averaging#Dollar...
tl;dr: If you think the market will continue to go up in the short term, lump sum will always beat DCA. A better rule, however, is: do not try to time the market. Just invest when you can.
Is it true that the vast majority of all Bitcoin mining happens near hydro plants in China? If so, regardless of anything else, doesn't that expose Bitcoin users to significant state actor risk?
There is plenty of empirical evidence showing that DCA doesn't work, and only provide a psychological value. Why are people still using it? And for Bitcoin?
Earlier quoted context omitted.
what about taxes from selling?
Aren't taxes only applicable to the profits? I assume the only issue with taxes is it'd be a little more paperwork to document all the trades done with the bot than just a single buy-then-sell.
If you hold for less than a year it's income, if you hold for more than a year it's capital gains. So buy and hold would possibly be advantageous in the US at least (35% vs 15% tax rates.)
The re-balancing system (of which dollar averaging is a variant) is described in the Fortune's Formula book [1] as something that Claude Shannon [2] would demonstrate in his lectures at MIT as a mathematically proven guaranteed winning strategy. At the end of the talk there was a Q and A, and the first question always was "do you yourself use this system", to which he replied "Naw, the commissions alone would kill yo…
A better approach with an extremely volatile asset like Bitcoin is a simple tactical asset allocation strategy. For example, the following system significantly outperforms both buy-and-hold and dollar-cost averaging strategies. 1. Buy when the monthly price of Bitcoin is greater than its 10-month simple moving average (SMA). 2. Sell (and move to cash) when the monthly price is less than its 10-month SMA. That's it. M…
- Buy an European call and write an European put at this value. This neutralizes your exposure to fluctuations in price; OR - Helpfully calculate that the "delta" for delta-hedging this portfolio is 1/[present stock price] and replicate the put/call combo: when the market goes up 1%, you buy 1/S stock; when it goes down 1%, you sell 1/S stock.
To see why, look at https://en.wikipedia.org/wiki/Greeks_(finance)
Otherwise: try it with a spreadsheet program.
There is plenty of empirical evidence showing that DCA doesn't work, and only provide a psychological value. Why are people still using it? And for Bitcoin?
The amount of Claude Shannon worship in YC is astounding. Shannon basically lied (possibly to himself too) about AI for about 15 years from 1950 on.