For people talking about investing $100 (or whatever) out of each check being LSI in relation to that one specific payment, how do you rationalize people electing not to do something like maintaining a large emergency fund and then going 100% of pay into 401k in month 1 and then 0% of pay into 401k in months 2 - 12 and then you refill month 1's drain on the EF in the other 11 months?
For the sake of argument, this is a whole lot more like LSI than what people are normally doing by putting money in every month.
It also leaves intact the meaning "put money in every month rather than all in one shot" that most people associate with DCA.
I have actually heard of people tossing around the above idea, strangely enough.
I also want to point out that the Vanguard paper has the beginning and ending portfolio values at a difference of about 2.3%, favoring the LSI side. I think that it's worth noting that this is the average gain after 10y for doing the riskiest possible play.
It may not be prudent to do a much riskier strategy if the average payoff is only 2.3% ahead of a plan that's got a lot more downside protection and a lot more upside potential as well.
Not that I am advocating being a market timer or anything, but if I had 120k and I was doing DCA 10k/m in order to reduce my downside risk and in month 3 or something the market went down by 33%, I could easily pivot back to LSI at that point and have a far superior return as compared with LSI when we are 10y into the future. It's no big deal if it then dips temporarily farther after you go in, as long as you are still in for the long term.
It's absolutely dumb to sell in down markets, but it's in no respect dumb to buy more in down markets, as long as you want to leave that money in for 10y+ no matter what afterwards. There's basically no scenario where buying as much stock as possible in significantly down markets and then holding for 10y+ fails to work out well.
I think that the people at Vanguard should probably consider a DCA pivoting to LSI if the market goes down far enough as part of their paper. It absolutely is a valid strategy one can only pursue when one begins with DCA and it would significantly increase the average result for any DCA scenario where the market goes down in the DCA period.
In a general sense, I think we see a lot of this "dumbing down the losing strategy" theme in a lot of places and it bothers me. The winning side of this (LSI) gets to run with all its' horsepower, but the losing side gets hamstringed and can't use all the opportunities available to it. No wonder it consistently loses.