In the end, it seems that amongst the most reasonable and prudent of planners, would not overly lump sum at the top, yet if they were to make such an error, then (absent some rare surprise/emergency exceptions) they should be more than ready, willing and/or able to continue buying BTC if the BTC price drops after the lump sum investment and especially if such dip lasts a long time and/or dips in considerably large kinds of ways. Personally, I don't give much of a pass or have a lot of sympathy for the lump summers who are not ready, willing and able to follow up with further BTC buys.. and if they have blown their whole wadd, then they are likely guilty of gambling rather than investing, which sure they are free to do what they like, but I am also free to not have much sympathy for such an approach to BTC.
Definitely, overly lump summing without proper financial planning has lots of consequences on the investor both emotionally and financially
like being left with little funds to attend to basic needs and emergencies because when the lump summing is overly done, then it is evident that a lot of emergency funds must have gone into the investment and these might be emotionally stressful, especially when the markets move sharply below the purchase price creating a state of restlessness for the investor since he did not invest only with discretionary income and most times the investor might not be able to contain the pressure leading to panic selling and immediate loss in investments.
There are a lot of ways that a person could end up "overdoing" his investment into bitcoin in a lump sum form without necessarily dipping into any backup funds, and he might even had completely stayed within his discretionary fund too, and still ended up overdoing it in terms of other options that might have had been available to him.
My point is that a guy might come to various kinds of balances within his budgeting and his authorization, and even if we go with an example of a guy who might have gotten into bitcoin with $12k of available funds, and he had $200 per week that he could buy bitcoin with his regular salary through DCA and he also has sufficient backup funds (emergency, reserves and float), and so instead of dividing his extra $12k into three parts (DCA, lump sum and buying on dip), he decides to invest all of the $12k right away, and so in that example he is totally within his discretionary income and within his range of options to invest all of the $12k right away... and there is nothing really wrong with his choice, but then when the BTC price goes down instead of up, he might have regrets that he had not planned more deliberately and accounted for either price direction.. So the level of his "overdoing it" still is not really damaging him in any great way, but he just had not realized his mistake until the price went down and then he realized that he had not even really thought about preparing for that possibility with the extra $12k that he had, and so he can still buy $200 per week with his regular DCA as compared to with other options that he would have had available if he had at least considered dividing the $12k into 3 parts, and I am not even saying that there is any exact correct answer since a guy could still consider the dividing the $12k into three parts and still come to a conclusion to buy $12k worth of bitcoin right away and have his $200 per week DCA amount serve as any kind of buying on dip that might end up happening..
Other times the shock from overinvesting in bitcoin at a point can shorten the longevity of your investment journey as an investor since recovery time would be taken off to gain your balance and there is no guarantee the investor would return to regular investment pattern anytime soon. Also, the less informed investor may be gathering funds to lumpsum again and miss out purchasing at periodic good prices that DCA presents and possibly may not even be able to gather the mighty funds as expected, therefore ending his investment journey as soon as he started.
You are not wrong. You are just using a more extreme version of making a mistake than what I had suggested to be the scenario, especially since guys can purposefully choose to overinvest in a kind of lump sum way, yet without tapping into their back up funds or even going beyond their discretionary income, but then still realizing that they had overdone it in terms of their own standards, so they won't necessarily have a lot of losses from the mistake, but might realize that the next time that they get a lump sum amount of money that they are able to invest, that they consider the three options, and sure, maybe in the future, they might still invest $9k of the $12k right away and only put $1,500 into each of the categories of buying the dip and adding to their regular DCA for 3 months or whatever period they decide to divide out the $1,500 that they are adding to their regular DCA amount - maybe it is 15 weeks (add $100 per week for DCA).. and then maybe with the buying on dip, they spread out $300 buy orders every $2k drop for the next $10k. whether the BTC price is going to drop or not, that is how they decided to allocate their buy on dip amounts.. so they end up still feeling better about their whole decision regarding how to treat the allocation of their extra $12k lump sum amount with only $9k of it being used to buy BTC right away, rather than $12k being used to buy BTC right away.
Investing as much as you can contain and following up with DCA helps you cultivate a disciplined approach to investing and be able to buy periodically and accumulate good stashes of bitcoin in no distant time as long as you have started, you are consistent with it and have set an investment target, you would achieve it with time while your periodic investments places less financial, emotional and physical burden on you.
When a guy is fairly early on in his BTC accumulation journey, he may already have established a DCA amount that he is doing regularly, and even if he is first getting into bitcoin, he might start with a lump sum and want to decide how to allocate that lump sum and whether he might also consider to continue to DCA too, since it is a bit more burdensome to attempt to front load or to even loan against his regular cashflow, and so a guy might get eager to get into bitcoin and to have some kind of a front loading into the bitcoin investment in order to prepare for up.. .. yet at the same time, he has to consider his own limits in terms of how much to maybe hold in reserves and if he considers that his regular DCA ($200 per week in my above example) is going to cover any of his concerns for dips.
So then the brand new investor might be in a bit of a different position in terms of how to treat any lump sum amounts that he might have available, as compared with the investor who might come across extra money 6 months to 12 months to 24 months after he had already been investing in bitcoin, since the one who gets some kind of extra lump sum amount later down the road, his already having had established some kind of a bitcoin accumulation amount, might contribute towards his feeling less urgent about any need that he might feel to have about preparing for UP as compared to a newbie who might not hardly have any BTC already purchased. Any of the levels of BTC accumulation already done could still result in a guy making mistakes in his calculations and maybe overdoing his investment and then realizing that he could have had divided it up differently, even though there is no perfect answer, there are some answers that are more suitable to his actual situation, and it is better if he considers the three categories, even if he might still be weighted towards one part or another partly depending on how many coins he already had accumulated.
The DCA amount does not need to be the same amount, and the DCA amount and the regularity of such investments could strictly be based upon when a person has a certain level of discretionary income that is upon his own choosing in regards to reaching such thresholds, so even relatively modest amounts of investing into bitcoin could end up paying off quite well in the long term, as long as the investor also understands that investing can sometimes take time to play out.
I really feel there should be a base amount when DCAing, sort of an amount you should not go below, so as to put yourself in check and foster continued discipline and commitment in your investment. This comes from the knowledge that the human mind is cunny and can overly adapt to a pattern and possibly exploit it to the disadvantage of the individual, so for example, If you set a base, lets say $50 and you know that you can afford it weekly as a minimum, at some times when you have more cash with you you can invest $70, $100 or even more provided you have made accurate plans for the next week's minimum of $50 to fall in place. you are better off than someone who invests $200 this week and possibly $20 next week, $30 in two weeks time as he can even decide not to invest in a week citing and deceiving himself that he has invested much previously.
This will help you become more disciplined and consistent investor over a long period of time as against investing randomly without an investment guideline for yourself and the guidelines would help you succeed in your investment journey with ease as it tends to be part of you overtime and as a committed investor, the more your earnings increase, the more you raise the bar on your minimum investment and the more bitcoin you would accumulate over a long period of time.
A minimum investment amount likely would work better for those in their earliest times of getting into DCAing and perhaps even someone who is also relatively passive and whimpy, so forcing themselves to invest a certain amount every week no matter what. So then yeah, the one who might add to the DCA amount during some weeks and then just keeping the regular minimum investment amount no matter what, those persons could also have weeks where they are able to be more aggressive in their BTC investment including supplementing their weekly DCA amounts, as you mentioned.
The DCA amount does not need to be the same amount, and the DCA amount and the regularity of such investments could strictly be based upon when a person has a certain level of discretionary income that is upon his own choosing in regards to reaching such thresholds, so even relatively modest amounts of investing into bitcoin could end up paying off quite well in the long term, as long as the investor also understands that investing can sometimes take time to play out.
I really feel there should be a base amount when DCAing, sort of an amount you should not go below, so as to put yourself in check and foster continued discipline and commitment in your investment. This comes from the knowledge that the human mind is cunny and can overly adapt to a pattern and possibly exploit it to the disadvantage of the individual, so for example, If you set a base, lets say $50 and you know that you can afford it weekly as a minimum, at some times when you have more cash with you you can invest $70, $100 or even more provided you have made accurate plans for the next week's minimum of $50 to fall in place. you are better off than someone who invests $200 this week and possibly $20 next week, $30 in two weeks time as he can even decide not to invest in a week citing and deceiving himself that he has invested much previously.
This will help you become more disciplined and consistent investor over a long period of time as against investing randomly without an investment guideline for yourself and the guidelines would help you succeed in your investment journey with ease as it tends to be part of you overtime and as a committed investor, the more your earnings increase, the more you raise the bar on your minimum investment and the more bitcoin you would accumulate over a long period of time.
Of course, it is good to assign a fixed amount from our discretionary income into regular buying of bitcoin through DCA weekly or monthly but sometimes this might not be possible because it is not of our own control but based on our expenses that arises in different weeks. If you observe sometimes we might spend more than what we budget for the week due to increase in our needs for that week and sometimes we might spend less due to decrease in our weekly expenses.
In such scenarios the investor might choose to invest $50 weekly but when the expenses of his needs increases, he can cut down his DCA amount to $40 for that week and if his expenses on another week decreases, he might increase his DCA amount to $60. The most important thing is that the investor did not stop buying but continues buying no matter how small he could buy in a week.
Also an investor might have an increament in his monthly income, or has an additional means of income along the line of his bitcoin accumulation journey, he will increase the amount that he is using to DCA in order for him to buy bitcoin more aggressively as long as he did not over do it.
There can also be a case where an investor did not have any discretionary income on that week because of too much responsibility for the week and his discretionary income was exhausted, such investor don't need to worry that he did not buy bitcoin for that week and he will just hodli and buy the next week. Another scenario is if the investor loses his job at that moment, he is to pause his bitcoin accumulation until he gets a new job while he feeds with his emergency funds and reserve for the main time till he gets a new job and continue accumulating. If you have the funds to keep on buying don't stop just keep on buying.
For sure, there are levels of cashflow irregularities, and some of the irregularities are within predicted parameters such as changes in expenses or even 1 or 2 surprise bills that might end up being covered by float and/or by reserve funds without having to dip into emergency funds and/or without having to even make adjustments to the minimum DCA, if that amount had been set for $50 per week.
Other cases of a lost job may or may not end up resulting in the need to discontinue DCA, depending on the extent to which reserves might be sufficiently present and the odds of getting another job within a time frame that any of your funds might still be sufficient, but yeah, there could be situations in which the funds are not sufficient and the prospects of replacing the income from the job might not be high, and that might call for much more drastic measures, which include discontinuing or lowering DCA amounts... I tend to think that any time emergency funds might start to get dipped into, then DCA would have been cut prior to dipping into emergency funds, but surely guys could have different parameters in terms of how to treat the matters, and how much depletion of funds require more drastic measures.
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Nice instances you've go there, but in my own reasoning, the only scenario that has to actively affect the investor's accumulation journey for a period of time is when the investor looses his source of livelihood, then he might take a temporal break until he gains his ground and resumes his accumulation journey.
Addressing that of when the investor has a lot of expenses or was not able to buy at the base price as @Sticky Bomb illustrates, the best thing is to buy as much as he can for that week and note down the makeup amount and roll it over to the next week or thereabout, maybe he was able to buy $30 worth of bitcoin for this week, then in his accumulation record book, he should push the balance to the next week indicating a purchase of $70 to offset the previous week if he is still able to maintain that base price, where he cannot, he should be adjust the base amount to any amount he is comfortable with.
the most important thing is to set standards and follow suit to maintain discipline and consistency in the accumulation journey. Base price is a rule and can be amended to suit the investor's capacities. The most Important thing is that he does not stop buying, remains disciplined, committed and accountable to himself and does not leave his accumulation journey to chances but follows some standards set by him to guide him in the accumulation journey. It is good to always know what you are expecting from yourself and it will motivate you to do even more than average, there is a saying that if you aim for the moon, even if you are falling, you fall among the stars meaning that worse comes to worse, he settles for the base price.
Of course, we set our own rules and parameters which we can amend from time to time based on our priorities, and some guys might consider rolling over of funds from week to week to be o.k, and other guys might not tend to allow rolling over absent certain circumstances that he finds acceptable. Some guys might be used to having a lot of jobs and cashflows, so they might not get too worked up about the loss of any of their cashflows, but if they get injured and all of their cashflows dry up, they might have to reconsider their own past practices, including that some guys do not keep much if any backup funds because they consider their various sources of cashflows to be sufficient as back up funds, which might not end up working out so well for them if some unexpected circumstances might end up causing more of their cashflows to dry up than they had anticipated to be likely.
There could be guys who are pretty loosey goosey with all of their rules, yet they still might know that if they end up dipping into a certain amount of money that they have on reserves, then it becomes time for them to start to buckle down and become more strict with their spending until they return back up a certain amount of funds that they keep as their cushion or their layers of cushion... their cushion might be strictly in cash, or they might have other places that they hold their cushion, but if they end up having to use some of their cash, then they know that they have to access some of their other cash that might have a time delay in retrieving it.. .. so warning bells go off at certain thresholds of using up cushion/backup funds.
