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Excellent points! DCA’ing downward into an individual stock is a risky proposition. DCA’ing downward into a broadly-diversified index fund is far less scary. 🙂
Great post! I wish people would just stop taking money out AFTER the market crashes and buy them back AFTER the market does well. Sigh. Hopefully they will learn some day.
Technically this might not be dollar-cost-averaging. DCA is what you do when you have a lump sum and decide to buy into the market slowly rather than invest it all at once. While somewhat more conservative, on average this is a losing move. Buying in today is better than buying in tomorrow, on average. Unless you are highly concerned about the market’s immediate future, it’s not necessarily a great idea.
Instead your two examples were probably exercising automatic investing – investing new wealth as they earned it and without regard for market direction. That is a *great* idea and brings about good results over the long term. There’s a lot of data out there about how DCA is a bad idea, but it’s all based on the notion that you have a choice to invest today, but decide to spread it out instead.