I understand the theory behind dollar-cost averaging on the buy-side, and there are many articles about why it does (or doesn't work). But I can't find much, if anything, about its value when selling. So here's my situation:
Say it's Monday morning and I have a block of 500 shares currently worth $10000 that I must completely sell by the end of the week (therefore I can't set a market limit and try to sell on an uptick). I have no idea which way the stock price is going to move or what its volatility is. Is any one of these three strategies better than the other two?
- Pick a day at random and sell all 500 shares at noon on that day, regardless of the price.
- Sell 100 shares every day at noon, regardless of the price.
- Every day at noon, sell $2000 worth of shares, regardless of the price. On Friday, sell everything (assuming there is anything left).
With #1, I have one commission to pay; with #2 and #3, I pay 5 commissions. It seems to me that the only advantage to the latter two strategies is to reduce my risk a little, but doesn't increase my expected return. And the extra commissions would actually reduce it. Am I missing something?