Comments on: Dollar-Cost Averaging Your Way Through the Depression http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/ 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. Sat, 11 Feb 2012 20:32:19 +0000 hourly 1 http://wordpress.org/?v= By: frank http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-457853 frank Wed, 25 May 2011 13:11:42 +0000 http://allfinancialmatters.com/?p=2924#comment-457853 visiting this site long after it - and comments - was posted I wanted to point out that investing is all about managing risks and is always a trade off. DCA works to mitigate investment risk in a down market, but does not address opportunity cost in a rising market. However, studies and my experience has found that investors feel the pain of losses much more than gains, so unless we are guaranteed an upside market, DCA makes sense. Finally, most investors are using DCA through 401k contributions, and we all know that there is a huge shortfall in retirement savings, so let's encourage DCA even if it lacks perfection. visiting this site long after it – and comments – was posted I wanted to point out that investing is all about managing risks and is always a trade off. DCA works to mitigate investment risk in a down market, but does not address opportunity cost in a rising market. However, studies and my experience has found that investors feel the pain of losses much more than gains, so unless we are guaranteed an upside market, DCA makes sense. Finally, most investors are using DCA through 401k contributions, and we all know that there is a huge shortfall in retirement savings, so let’s encourage DCA even if it lacks perfection.

]]> By: rajesh chhabria http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-429206 rajesh chhabria Wed, 08 Jul 2009 15:19:06 +0000 http://allfinancialmatters.com/?p=2924#comment-429206 well if you invest lump sum and then see your investment go down / most panic and sell off so on paper comparing returns over 20-30 years lump sum may be attractive / but who holds on in downturns / most lose / dca removes fear and keeps investing/ so what if you earn a few points less / man -- ur making profits not loss as most do cheers well if you invest lump sum and then see your investment go down / most panic and sell off

so on paper comparing returns over 20-30 years lump sum may be attractive / but who holds on in downturns / most lose / dca removes fear and keeps investing/ so what if you earn a few points less / man — ur making profits not loss as most do

cheers

]]> By: Niilo http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-399563 Niilo Wed, 28 Jan 2009 16:27:51 +0000 http://allfinancialmatters.com/?p=2924#comment-399563 Certainly for a rising stock market, dollar cost averaging (DCA) fails against the lump-sum investment. This is inevitable, as simply all the money is exposed to all the growth. However, my consistent criticism is simply that we do not have our life savings at the beginning of our life. Theoretically we can borrow it and use the gains to make interest payments, but what bank would give a 20-year-old what he claims he'll have in 40 years? This leaves most people in the situation that they have some savings now, but an employment income stream (with an investment portion) into the future. For a long-term buy-and-hold strategy, it would then be advisable to use an index fund with the lowest possible cost structure (internal management fees and commissions to buy more), put your existing retirement (or long term, 10 year+) money into it, then contribute your investment steam monthly/quarterly/etc, hoping to reap the benefits of the lump-sum investment and the DCA benefits of the monthly payments. Then you really *buy* continuously and *hold* continuously. In my mind, it is really buying into the ultimate representation of a nation's industry. Certainly for a rising stock market, dollar cost averaging (DCA) fails against the lump-sum investment. This is inevitable, as simply all the money is exposed to all the growth. However, my consistent criticism is simply that we do not have our life savings at the beginning of our life. Theoretically we can borrow it and use the gains to make interest payments, but what bank would give a 20-year-old what he claims he’ll have in 40 years? This leaves most people in the situation that they have some savings now, but an employment income stream (with an investment portion) into the future. For a long-term buy-and-hold strategy, it would then be advisable to use an index fund with the lowest possible cost structure (internal management fees and commissions to buy more), put your existing retirement (or long term, 10 year+) money into it, then contribute your investment steam monthly/quarterly/etc, hoping to reap the benefits of the lump-sum investment and the DCA benefits of the monthly payments. Then you really *buy* continuously and *hold* continuously. In my mind, it is really buying into the ultimate representation of a nation’s industry.

]]> By: Ross Williams http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-387381 Ross Williams Fri, 12 Dec 2008 04:34:15 +0000 http://allfinancialmatters.com/?p=2924#comment-387381 The argument against dollar cost averaging is being made by the same people that priced the market as if there was no risk. And they will never learn the lesson they should have just learned. Markets have risk - you can lose money as well as make it. The argument against dollar cost averaging is being made by the same people that priced the market as if there was no risk. And they will never learn the lesson they should have just learned. Markets have risk – you can lose money as well as make it.

]]> By: Bill http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-377343 Bill Sat, 08 Nov 2008 22:34:32 +0000 http://allfinancialmatters.com/?p=2924#comment-377343 What if you were dollar cost averaging with WaMu? I guess if you're talking S&P, that's one thing, but with specific stocks, some might not survive. What if you were dollar cost averaging with WaMu? I guess if you’re talking S&P, that’s one thing, but with specific stocks, some might not survive.

]]> By: some1 http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-377005 some1 Fri, 07 Nov 2008 03:33:37 +0000 http://allfinancialmatters.com/?p=2924#comment-377005 "but I’m not sure if waiting to see how things pan out is really trying to “time the market” in the traditional sense." it is. “but I’m not sure if waiting to see how things pan out is really trying to “time the market” in the traditional sense.”

it is.

]]> By: Steward http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-376471 Steward Wed, 05 Nov 2008 19:41:27 +0000 http://allfinancialmatters.com/?p=2924#comment-376471 @ lordskip - Hindsight is 20/20. I think I understand the whole "market-timing is risky" argument, but I'm not sure if waiting to see how things pan out is really trying to "time the market" in the traditional sense. It might just be being prudent? @ lordskip – Hindsight is 20/20. I think I understand the whole “market-timing is risky” argument, but I’m not sure if waiting to see how things pan out is really trying to “time the market” in the traditional sense. It might just be being prudent?

]]> By: lordskip http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-376129 lordskip Tue, 04 Nov 2008 15:43:17 +0000 http://allfinancialmatters.com/?p=2924#comment-376129 @steward: what you're suggesting is market-timing. There's quite a lot of material written about why that could be a bad idea. @steward:

what you’re suggesting is market-timing. There’s quite a lot of material written about why that could be a bad idea.

]]> By: Steward http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-375998 Steward Tue, 04 Nov 2008 03:17:29 +0000 http://allfinancialmatters.com/?p=2924#comment-375998 I've been thinking about this as topic as well. It seems to me like a it would be better to wait until after the fall was over before beginning to pump cash into the market. From what I can see from the graph that you generated, the market fell for well over a year! If a hypothetical investor had shown some patience and held off on a dollar cost averaging strategy for 6 months, 12 months, or even 18 months it seems as though they could have improved returns dramatically. I think that that is food for thought in our current economic conditions. I’ve been thinking about this as topic as well. It seems to me like a it would be better to wait until after the fall was over before beginning to pump cash into the market. From what I can see from the graph that you generated, the market fell for well over a year! If a hypothetical investor had shown some patience and held off on a dollar cost averaging strategy for 6 months, 12 months, or even 18 months it seems as though they could have improved returns dramatically. I think that that is food for thought in our current economic conditions.

]]> By: Andy http://allfinancialmatters.com/2008/11/02/dollar-cost-averaging-your-way-through-the-depression/comment-page-1/#comment-375848 Andy Mon, 03 Nov 2008 13:39:38 +0000 http://allfinancialmatters.com/?p=2924#comment-375848 That's true, but on the other hand I believe banks didn't pay interest on deposits in the 30s. That’s true, but on the other hand I believe banks didn’t pay interest on deposits in the 30s.

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