Comments on: Dollar Cost Averaging v. Lump Sum Investing – Part II http://allfinancialmatters.com/2006/07/27/dollar-cost-averaging-v-lump-sum-investing-part-ii/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: Dollar Cost Averaging vs Other Investment Timing Strategies, An Analysis http://allfinancialmatters.com/2006/07/27/dollar-cost-averaging-v-lump-sum-investing-part-ii/comment-page-1/#comment-236921 Dollar Cost Averaging vs Other Investment Timing Strategies, An Analysis Mon, 18 Feb 2008 16:28:16 +0000 http://allthingsfinancialblog.com/?p=980#comment-236921 [...] Finally, this post wouldn’t be complete without this tool that shows you the performance difference between LSI and DCA throughout the years. I’ve also enjoyed meaningful posts on this topic from My Money Blog and All Financial Matters, with the latter offering us a terrific chart showing the performance differences of these methods. [...] [...] Finally, this post wouldn’t be complete without this tool that shows you the performance difference between LSI and DCA throughout the years. I’ve also enjoyed meaningful posts on this topic from My Money Blog and All Financial Matters, with the latter offering us a terrific chart showing the performance differences of these methods. [...]

]]> By: Dollar Cost Averaging vs Other Investment Timing Strategies, An Analysis http://allfinancialmatters.com/2006/07/27/dollar-cost-averaging-v-lump-sum-investing-part-ii/comment-page-1/#comment-236922 Dollar Cost Averaging vs Other Investment Timing Strategies, An Analysis Mon, 18 Feb 2008 16:28:15 +0000 http://allthingsfinancialblog.com/?p=980#comment-236922 [...] Finally, this post wouldn’t be complete without this tool that shows you the performance difference between LSI and DCA throughout the years. I’ve also enjoyed meaningful posts on this topic from My Money Blog and All Financial Matters, with the latter offering us a terrific chart showing the performance differences of these methods. [...] [...] Finally, this post wouldn’t be complete without this tool that shows you the performance difference between LSI and DCA throughout the years. I’ve also enjoyed meaningful posts on this topic from My Money Blog and All Financial Matters, with the latter offering us a terrific chart showing the performance differences of these methods. [...]

]]> By: jack http://allfinancialmatters.com/2006/07/27/dollar-cost-averaging-v-lump-sum-investing-part-ii/comment-page-1/#comment-16711 jack Fri, 28 Jul 2006 12:24:43 +0000 http://allthingsfinancialblog.com/?p=980#comment-16711 Nick and others are right. The comparison of dollar cost averaging to lump sum investment in this USA Today article is EXTREMELY flawed to not consider the time value of money. If you had $100 to invest every month for 10 years that certainly is not worth $12,000 today. It's worth much less, depending on what interest rate you would be charged. Conversely, if you had $12,000 to invest, that certainly is worth much more than $100 per month over the next 10 years, depending on what interest rate you could get. Nick and others are right. The comparison of dollar cost averaging to lump sum investment in this USA Today article is EXTREMELY flawed to not consider the time value of money. If you had $100 to invest every month for 10 years that certainly is not worth $12,000 today. It’s worth much less, depending on what interest rate you would be charged. Conversely, if you had $12,000 to invest, that certainly is worth much more than $100 per month over the next 10 years, depending on what interest rate you could get.

]]> By: samerwriter http://allfinancialmatters.com/2006/07/27/dollar-cost-averaging-v-lump-sum-investing-part-ii/comment-page-1/#comment-16687 samerwriter Fri, 28 Jul 2006 02:03:10 +0000 http://allthingsfinancialblog.com/?p=980#comment-16687 As you mentioned above and in your first post on the subject, for most of us we are dollar-cost-averaging by necessity because we save money as it comes in. It is an interesting question, though; if you inherit $10,000 from Aunt Gladys, what is the best way to invest it? As a lump sum? Dollar cost averaged daily over a month? Monthly over a year? To really answer the question a large number of simulations would need to be done with a large number of starting points. The article referenced in part 1 made a couple mistakes; first, the writer seemingly only made the calculations for one period. The results would have been very different if the period started in, for example, 1999. Second, nobody would DCA a lump sum over 10 years without getting at least some return on the uninvested portion in the interim. As you mentioned above and in your first post on the subject, for most of us we are dollar-cost-averaging by necessity because we save money as it comes in.

It is an interesting question, though; if you inherit $10,000 from Aunt Gladys, what is the best way to invest it? As a lump sum? Dollar cost averaged daily over a month? Monthly over a year? To really answer the question a large number of simulations would need to be done with a large number of starting points.

The article referenced in part 1 made a couple mistakes; first, the writer seemingly only made the calculations for one period. The results would have been very different if the period started in, for example, 1999. Second, nobody would DCA a lump sum over 10 years without getting at least some return on the uninvested portion in the interim.

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