Dollar-cost averaging
Dollar-cost averaging (DCA) is an investment strategy that involves investing a fixed dollar amount into the market over a period of time. This approach is commonly used when a client receives a large sum of money but prefers not to invest it all at once.
How Symplany manages DCA
The most common way to dollar-cost average is by making recurring cash deposits into an investment account. When a client has a large sum of money, they may choose to invest it slowly over time, even if they decide to transfer the entire amount into their investment account.
By default, Symplany’s trading logic invests all available cash into the market. However, the DCA feature allows users to set 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 next market day) to determine how much of the available cash can be invested. Any cash that is not invested remains in sweep. Two key factors determine whether Symplany will trade an account:
- Does the account have cash exceeding the minimum sweep requirement?
- How much has already been invested in the market over the past month?
Symplany will never invest more than the set monthly DCA limit and will continue moving cash into the market until the account’s sweep value reaches the minimum sweep requirement.
Note: DCA logic applies only to cash. If securities are transferred into an account and subsequently sold, Symplany will invest the proceeds and keep the client in the market.
Example
You set a monthly DCA limit of $10,000 for your client's account. On the 1st of the next month, the client deposits $75,000 into their account.
- On the 2nd, Symplany will invest up to $10,000.
- Each following month on the 2nd (or the next market day if the 2nd falls on a non-trading day), another $10,000 will be invested.
- This process continues until all excess cash is invested, which in this case would take approximately eight months, assuming no other activity occurs in the account.
Subsequent deposits, withdrawals, or market movements may impact the timeline for full investment. However, the account will never invest more than the set DCA limit in any given month.
For a step-by-step guide on enabling DCA, check out the video above.
Common Questions
How do I enable DCA for an account?
Toggle on DCA and follow the prompt to set the maximum monthly investment amount.
Will I be notified when an account completes its last DCA trade?
Yes. If DCA is enabled and all available cash has been invested, you will receive an email notification.
Will DCA automatically turn off after all funds are invested?
No. DCA must be manually disabled by you or someone in your practice. Until it is turned off, future trades will continue to be limited to the monthly DCA amount.
Can I enable gain limiter and/or tax-loss harvesting (TLH) while DCA is enabled?
Yes. All other account functions will operate normally, but total investments will be constrained by the DCA limit.
Can I withdraw funds from an account while DCA is enabled?
Yes. However, withdrawals may reduce the cash available for investment and impact the DCA schedule.
What if I don’t want my client to be billed on cash held in sweep?
If you are dollar-cost averaging for an extended period (e.g., more than six months), you can email the NSRG investment team to request that cash in sweep be moved to “Protected Cash.” This will prevent billing on those funds.
Symplany’s stance on DCA
While DCA typically results in lower long-term wealth accumulation compared to lump-sum investing, it can help risk-averse investors mitigate short-term emotional fears of market losses.