Dollar-cost averaging
Dollar-cost averaging (DCA) entails investing a fixed dollar amount into the market over a period of time. It's common for this strategy to be used when a client receives a large sum of money, but doesn’t want to invest it all at once.
How Symplany manages DCA
The most common way for a client to dollar-cost average is to deposit funds into their account on a recurring basis. However, when a client has a large sum of money, they may prefer to transfer the entire amount into their investment account at once.
Symplany's default trading logic invests all available cash into the market.
The DCA feature sets a monthly limit on how much can be invested in a particular account.
Once DCA is enabled, Symplany will run a daily process (starting the following market day) to determine how much of the available cash can be invested. Anything that doesn't get invested will remain in sweep. Two variables determine whether Symplany will trade an account:
- Does the account have cash in excess of the minimum sweep requirement?
- If so, how much has already been invested into the market over the last month?
Symplany will never invest more than your set maximum amount per month. It will continue to move cash into the market until the account's sweep value is equal to the minimum sweep requirement.
Example
You set a monthly DCA limit of $10,000 for your client's account. Next month, on the 1st, the client deposits $75,000 into their account. Symplany will invest up to $10,000 the following day (on the 2nd), and then an additional $10,000 each month on the 2nd going forward (or the following market day if the market is not open on the 2nd), until all of the excess cash has been invested. In this scenario, the DCA trades will continue for a span of roughly 8 months, assuming no other activity takes place in the account.
Subsequent deposits or withdrawals in the account, along with market movement, may impact the number of months it takes to fully invest all excess cash in the account. Regardless, the account will not invest more than the DCA limit any given month.
Check out the video above to learn more about DCA and how to enable it in your account(s).
Common questions
Q: How do I turn on DCA for one of my accounts?
A: Toggle on DCA and follow the prompt to indicate the maximum amount you want invested each month.
Q: Will I be notified when an account has finished its last DCA
A: Yes. If DCA is turned "on" and Symplany has invested all of the available cash, you will receive an email notification.
Q: Will DCA automatically turn off after all funds have been invested?
A: No. DCA can only be disabled manually by either you or someone in your practice. Your FLD account will continue to limit future trades to no more than your monthly DCA amount, until you turn it off.
Q: Can I still use gain locks and/or TLH when I have DCA turned on?
A: Yes, everything else will function as normal, but the total amount moved to the market will be limited by the DCA limit.
Q: Can I place a withdrawal in an account when DCA is enabled?
A: Yes. Note that placing a withdrawal will likely impact the DCA schedule by reducing the cash available to invest.
Q: What if I don't want to bill my client on cash that's in sweep?
A: If you're dollar-cost averaging for an extended period of time (e.g. more than 6 months), you can email the NSRG investment team and ask that they move any dollars in sweep into "Protected Cash." This will keep the client from getting billed on these funds.
Symplany's stance on DCA
Although DCA usually means less wealth in the long haul, it can help risk-averse investors alleviate an emotional fear of loss in the short term.