How to dollar-cost-average with a large amount of money in a savings account?
DCA is not 10%/day over 10 days. If I read the objective correctly, I'd suggest about a 5 year plan. It's difficult to avoid the issue of market timing. And any observation I'd make about the relative valuation of the market would be opinion. By this I mean, some are saying that PE/10 which Nobel prize winner Robert Schiller made well known, if not popular, shows we are pretty high. Others are suggesting the current PE is appropriate given the near zero rate of borrowing.  Your income puts long term gains at zero under current tax code. Short term are at your marginal rate.  I would caution not to let the tax tail wag the investing dog. The fellow that makes too many buy/sell decisions based on his taxes is likely to lag he who followed his overall allocation goals. "I up voted JoeTaxpayer but i would like add a couple of things. Dollar Cost averaging over a 5 day period is in no way practical.  If you get a 1% swing in that time that would be quite a lot. Personally I think 5 years is way to long.  When markets go down they go down fast. I would suggest 1 to 2 years investing quarterly.   I would hate seeing you miss out on market gains for a 5 year period on the last of your money. The whole point of Dollar Cost averaging instead of market timing is the mantra ""Its about time in the market not timing the market""  So if you have money on the sidelines for years you are missing out on your time in the market."
"The way I've implemented essentially ""value averaging"", is to keep a constant ratio between different investment types in my portfolio. Lets say (in a simple example), 25% cash, 25% REIT (real estate), 25% US Stock, 25% Foreign stock. Lets say I deposit a set $1000 per month into this account. If the stock portion goes up, it will look like I need more cash & REIT, so all of that $1000 goes into cash & the REIT portion to get them towards their 25%. I may spend months investing only in cash & the REIT while the stock goes up. Of course if the stock goes down, that $1000 per month goes into the stock accounts. Now you can also balance your account if you'd like, regularly selling stock (or the REIT), and making the account balanced. So if the stock goes down, you'd use the cash & REIT to purchase more stock. If the stock went up, you'd sell the stock, and buy REIT & leave more in cash." The GnuCash manual has a page with examples of opening new accounts. The tl;dr is: use the Equity:Opening Balance to offset your original amounts. The further explanation from the GnuCash page is: As shown earlier with the Assets:Checking account, the starting   balances in an account are typically assigned to a special account   called Equity:Opening Balance. To start filling in this chart of   account, begin by setting the starting balances for the accounts.   Assume that there is $1000 in the savings account and $500 charged on   the credit card. Open the Assets:Savings account register. Select View from the menu and check to make sure you are in Basic Ledger style. You will   view your transactions in the other modes later, but for now let’s   enter a basic transaction using the basic default style. From the Assets:Savings account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred   from Equity:Opening Balance. Remember, basic transactions transfer   money from a source account to a destination account. Record the   transaction (press the Enter key, or click on the Enter icon). From the Assets:Checking account register window, enter a basic 2 account transaction to set your starting balance to $1000, transferred   from Equity:Opening Balance. From the Liabilities:Visa account register window, enter a basic 2 account transaction to set your starting balance to $500, transferred   from Equity:Opening Balance. This is done by entering the $500 as a   charge in the Visa account (or decrease in the Opening Balance   account), since it is money you borrowed. Record the transaction   (press the Enter key, or click on the Enter icon). You should now have 3 accounts with opening balances set. Assets:Checking, Assets:Savings, and Liabilities:Visa. Dollar-Cost averaging will allow you to reduce your risk while the stock prices falls provided: You must invest a fixed amount $X on a fixed time scale (i.e. every Y days). By doing this you will be able to take advantage of the lowering price by obtaining more shares per period as the price falls. But at the same time, if it starts to rise, you will already have your pig in the race.  Example: Suppose you wanted to invest $300 in a company. We will do so over 3 periods. As the price falls, your average dollar cost will as well. But since you don't know where the bottom is, you cannot wait until the bottom. By trying to guess the bottom and dumping all of your investment at once you expose yourself to a higher level of risk. "I live near historic Concord, Massachusetts, and frequently drive past Walden Pond. I'm reminded of Henry David Thoreau's words,  ""Simplify, simplify, simplify."" In my opinion, fewer is better. 2 checkbooks? I don't see how that makes budgeting any easier. The normal set of expenses are easily kept as one bucket, one account.  The savings 2&3 accounts can also be combined and tracked if you really want to think of them as separate accounts.  Now, when you talk about 'Retirement' that can be in tax-wise retirement accounts, e.g. 401(k), IRA, etc. or post tax regular brokerage accounts. In our situation, the Schwab non-retirement account was able to handle emergency (as money market funds) along with vacation/rainy day, etc, in CDs of different maturities. As an old person, I remember CDs at 10% or higher, so leaving money in lower interest accounts wasn't good. Cash would go to CDs at 1-5 year maturities to maximize interest, but keep money maturing every 6-9 months.  Even with the goal of simplifying, my wife and I each have a 401(k), an IRA, and a Roth IRA, I also have an inherited Roth, and I manage my teen's Roth and brokerage accounts. That's 9 accounts right there. No way to reduce it.  To wrap it up, I'd go back to the first 4 you listed, and use the #4 checking attached to the broker account to be the emergency fund. Now you're at 3. Any higher granularity can be done with a spreadsheet.  Think of it this way - the day you see the house you love, will you not be so willing to give up that year's vacation?" "There is a saying in business: what gets measured gets done. Track every expense you make. Later, look over what you have learned. If 5% of your total budget is going to something frivolous, maybe you could halve it? If 1% or 0.1% is going to that frivolous expense, there's not much to be gained even by eliminating it. If you spend $200/mo on coffees, dropping those will help. If you spend $10/mo on coffees, you need to look elsewhere for your big savings. Have a target: I want to put $X into savings each month. Therefore I can only spend $Y. What do you have to change about last month's spending patterns to get down to $Y? Where are the easy targets for you? They will be different than the easy targets for me. What absolutely cannot change for you? Once you know the costs of what you're doing, you will know where it's possible to save, and where it's ""worth it"" to economize." r/personalfinance  r/investing   Make a budget, set goals, and make a plan on how to achieve them.   99% of people will say index funds and dollar cost average. Make sure to set up a retirement account and see if your company has a matching program   Edit- hire an accounting/tax specialist. "How often should one use dollar-cost averaging? Trivially, a dollar cost averaging (DCA) strategy must be  used at least twice! More seriously, DCA is a discipline that people (typically investors with relatively small amounts of money to invest each month or each quarter)  use to avoid succumbing to the temptation to ""time the market"".  As mhoran_psprep points out, it is well-suited to 401k plans and the like (e.g. 403b plans for educational and non-profit institutions, 457 plans for State employees, etc), and indeed is actually  the default option in such plans, since a fixed amount of money gets invested each week, or every  two weeks, or every month depending on the payroll schedule. Many plans offer just a few mutual funds in which to invest, though far too many people, having little knowledge or understanding of  investments, simply opt for the money-market fund or guaranteed annuity fund in their 4xx plans.  In any case, all your money goes to work immediately since all mutual funds let you invest in thousandths of a share. Some 401k/403b/457 plans allow investments in stocks through a brokerage, but I think that using DCA to  buy individual stocks in a retirement plan is not a good  idea at all. The reasons for this are that not only must shares must be bought in whole numbers (integers) but it is generally cheaper to buy stocks in round lots  of 100 (or multiples of 100) shares rather than in odd lots of, say, 37 shares. So buying stocks weekly, or biweekly or monthly in a 401k plan means paying more or having the money sit idle until enough is accumulated to buy 100 shares of a stock at which point the brokerage executes the order to buy the stock; and this is really not DCA at all.  Worse yet, if you let the money accumulate but you are the one calling the shots ""Buy 100 shares of APPL today"" instead of letting the brokerage execute the order when there is enough money, you are likely to  be timing the market instead of doing DCA. So, are brokerages useless in retirement fund accounts?  No, they can be useful but they are not suitable for DCA strategies involving buying stocks. Stick to mutual funds for DCA. Do people use it across the board on all stock investments? As indicated above, using DCA to buy individual stocks is not the best idea, regardless of whether it is done inside a retirement plan or outside. DCA outside a retirement plan works best if you not trust yourself to stick with the strategy (""Ooops, I forgot to mail the check yesterday; oh, well, I will do it next week"") but rather, arrange for your mutual fund company to take the money out of your checking account each week/month/quarter etc, and invest it in whatever fund(s) you have chosen. Most companies have such programs under names such as Automatic Investment Program (AIP) etc. Why not have your bank send the money to the mutual fund company instead? Well, that works too, but my bank charges me for sending the money whereas my mutual fund company does AIP for free. But YMMV. Dollar-cost averaging generally means investing  a fixed amount of money on a periodic basis. An alternative strategy, if one has decided that owning 1200 shares of FlyByKnight Co is a good investment to have, is to buy round lots of 100 shares of FBKCO each month. The amount of money invested each month varies, but at the end of the year, the average cost of the 1200 shares is the average of the prices on the 12 days on which the investments were made. Of course, by the end of the year, you might not think FBKCO is worth holding any more. This technique worked best in the  ""good old days"" when blue-chip stocks  paid what was for all practical purposes a guaranteed dividend each year, and people bought these stocks with the intention of passing them on to their widows and children." "I'll start by saying accounts that require a certain number of transactions are a horrible place to put any savings and, in fact, I'd stay away all together. However, you've asked a lot of questions here and are clearly more in-tune with this topic than most.  If I was young again and just starting to try to pile some money together, I would absolutely chase the highest interest rates by taking advantage of accounts like this.  If you have the discipline to hit the transaction counts and maintain the minimum balance AND leave your savings funds alone, do it. If for a single second you think you'll go out one Friday night and blow your emergency fund, put it somewhere else.   I used to keep really elaborate spreadsheets of my spending and savings with goals set and progress charts, etc.  I see the argument that the transaction count is not worth the gain in interest, but you've said you're not dealing with big numbers and 5% of $5,000 is about $255 after a year.  It's not a lot but it's 5x more than a ""normal"" no transaction hoops high-yield savings account; you get five years of interest each year.  So, yes, this is an amount of money you could probably generate by frequenting starbucks less, but presumably you're already doing that.  Obviously you would keep this to an upper account balance of $5,000 and put the rest in a vanilla high-yield savings; then when administering the transactions becomes too much work close the account." "If you just had one expense once a year of $1200, you would put in $100 a month. The average balance is going to be $600 in that case - the 0 and $1200 months average to $600, as do the $100 and $1100, the $200 and $1000, and so on. If you had one expense twice a year of $600 and put in $100 per month it will average to $300. You have a mix of 3/6/12 months - does 8 months seem reasonable as an ""average"" frequency? If so, there should be about a 4 month slush all the time. Now instead of one expense averaged over 12 months, imagine 12 accounts, each needing $100 a month. If you started at zero, you would put in $1200 the first month and immediately spend it. One account would go from +100 (its share of what you put in) to -1100 while the rest are all at +100. Overall your balance would be zero. Then the next month you would again deposit 1200 and spend 1200, bringing one account to -1000, one to -1100, and the rest to +200. You average to zero actually on deposit because some of the ""accounts"" have negative balances and some have positive. But aren't doing that. You ""caught up"" the months you were  behind. So it would be like putting in $1200 for the first account, $1100 for the second, $1000 for the third and so on - a total of $7800. Then you take out $1200 and go down to 6600. The next month you put in $1200 and take out $1200 but you will always have that $6600 amount in there. All of the accounts will have positive balances - averaging $550 in this example." Dollar cost averaging is beneficial if you don't have the money to make large investments but are able to add to your holding over time. If you can buy the same monetary amount at regular intervals over time, your average cost per share will be lower than the stock's average value over that time. This won't necessarily get you the best price, but it will get you, on the whole, a good price and will enable you to increase your holdings over time. If you're doing frequent trading on a highly volatile stock, you don't want to use this method. A better strategy is to buy the dips: Know the range, and place limit orders toward the bottom of the range. Then place limit orders to sell toward the high end of the range. If you do it right, you might be able to build up enough money to buy and sell increasing numbers of shares over time. But like any frequent trader, you'll have to deal with transaction fees; you'll need to be sure the fees don't eat all your profit. That doesn't sound like dollar cost averaging. That sounds like a form of day trading. Dollar cost averaging is how most people add money to their 401K, or how they add money to some IRA accounts. You are proposing a form of day trading. "I assume by that you mean gradually buying the same mix of funds over time.  If that's the case, there is no rational reason to do this.   Dollar-cost averaging is an artifact of the way most people fund their 401(k).  I would not consider it a viable ""strategy"".  (Neither does Wikipedia)  Let's say you have $100,000 that you add $10,000 at a time.  When you add money, one of three things can happen: Since you can't predict the future, there's no mathematical justification for buying in segments.  There's just as much chance that your funds will be worth more or less, so on average it should make little to no difference.   In fact, given the time value of money there is a slight  advantage to investing it all now so you can capture any future returns.  You can always rebalance later to capture gains on some funds and purchase funds that are down to (hopefully) catch them on a rebound." "I think we'd need to look at actual numbers to see where you're running into trouble. I'm also a little confused by your use of the term ""unexpected expenses"". You seem to be using that to describe expenses that are quite regular, that occur every X months, and so are totally expected. But assuming this is just some clumsy wording ... Here's the thing: Start out by taking the amount of each expense, divided by the number of months between occurrences. This is the monthly cost of each expense. Add all these up. This is the amount that you should be setting aside every month for these expenses, once you get a ""base amount"" set up. So to take a simple example: Say you have to pay property taxes of $1200 twice a year. So that's $1200 every 6 months = $200 per month. Also say you have to pay a water bill once every 3 months that's typically $90. So $90 divided by 3 = $30. Assuming that was it, in the long term you'd need to put aside $230 per month to stay even. I say ""in the long term"" because when you're just starting, you need to put aside an amount sufficient that your balance won't fall below zero. The easiest way to do this is to just set up a chart where you start from zero and add (in this example) $230 each month, and then subtract the amount of the bills when they will hit. Do this for some reasonable time in the future, say one year. Find the biggest negative balance. If you can add this amount to get started, you'll be safe. If not, add this amount divided by the number of months from now until it occurs and make that a temporary addition to your deposits. Check if you now are safely always positive. If not, repeat the process for the next biggest negative. For example, let's say the property tax bills are April and October and the water bills are February, May, August, and November. Then your chart would look like this: The biggest negative is -370 in April. So you have to add $370 in the first 4 months, or $92.50 per month. Let's say $93. That would give: Now you stay at least barely above water for the whole year. You could extend the chart our further, but odds are the exact numbers will change next year and you'll have to recalculate anyway. The more irregular the expenses, the more you  will build up just before the big expense hits. But that's the whole point of saving for these, right? If a $1200 bill is coming next week and you don't have close to $1200 saved up in the account, where is the money coming from? If you have enough spare cash that you can just take the $1200 out of what you would have spent on lunch tomorrow, then you don't need this sort of account." "Personally, I think you are approaching this from the wrong angle.  You're somewhat correct in assuming that what you're reading is usually some kind of marketing material.  Systematic Investment Plan (SIP) is not a universal piece of jargon in the financial world.  Dollar cost averaging is a pretty universal piece of jargon in the financial world and is a common topic taught in finance classes in the US. On average, verified by many studies, individuals will generate better investment returns when they proactively avoid timing the market or attempting to pick specific winners.  Say you decide to invest in a mutual fund, dollar cost averaging means you invest the same dollar amount in consistent intervals rather than buying a number of shares or buying sporadically when you feel the market is low. As an example I'll compare investing $50 per week on Wednesdays, versus 1 share per week on Wednesdays, or the full $850 on the first Wednesday.   I'll use the Vanguard Large cap fund as an example (VLCAX).  I realize this is not really an apples to apples comparison as the invested amounts are different, I just wanted to show how your rate of return can change depending on how your money goes in to the market even if the difference is subtle.  By investing a common dollar amount rather than a common share amount you ultimately maintain a lower average share price while the share price climbs.  It also keeps your investment easy to budget. Vanguard published an excellent paper discussing dollar cost averaging versus lump sum investing which concluded that you should invest as soon as you have funds, rather than parsing out a lump sum in to smaller periodic investments, which is illustrated in the third column above; and obviously worked out well as the market has been increasing. Ultimately, all of these companies are vying to customers so they all have marketing teams trying to figure out how to make their services sound interesting and unique.  If they all called dollar cost averaging, ""dollar cost averaging"" none of them would appear to be unique.  So they devise neat acronyms but it's all pretty much the same idea.  Trickle your money in to your investments as the money becomes available to you." "Dollar cost averaging is a fancy name someone came up with to say ""Invest all of the time"". I would not bother with spreading out purchases. If the market is too expensive right now ...so what? The items you sell will bring top dollar. The fund you buy will cost top dollar. It all evens out.  You could sell your assets and just sit on cash, but that would require knowing when the next market drop is coming..which no one knows. Also, it never really is cash; it goes into a money market fund which is not guaranteed. I would rather own companies(VSTAX) and collect the dividend."