The Fallacy of Dollar Cost Averaging

Thorley, Steven
September 1994
Financial Practice & Education;Fall/Winter94, Vol. 4 Issue 2, p138
Academic Journal
Explains the logical fallacy of Dollar Cost Averaging (DCA), the practice of making equal dollar investments over time in a stock or mutual fund. Mistake in using average cost and average price as performance measures; Analysis of the strategy in terms of expected return and risk; Numerical illustration of three investment strategies; Nonrandom price changes.


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