Comments on: How Long Will It Take to Get Even? http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/ 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: JLP http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-395246 JLP Tue, 06 Jan 2009 14:05:16 +0000 http://allfinancialmatters.com/?p=3061#comment-395246 Test Test

]]> By: Dave http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394515 Dave Sat, 03 Jan 2009 17:42:33 +0000 http://allfinancialmatters.com/?p=3061#comment-394515 I'm not sure which dead horse EnoughWealth is beating, or why he is beating it. The reality is that not only do people think that they are dollar cost averaging when they actually invest 100% of their savings each month via 401(k) plans or similar, as he says, but also that they ARE dollar cost averaging. I’m not sure which dead horse EnoughWealth is beating, or why he is beating it. The reality is that not only do people think that they are dollar cost averaging when they actually invest 100% of their savings each month via 401(k) plans or similar, as he says, but also that they ARE dollar cost averaging.

]]> By: EnoughWealth http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394488 EnoughWealth Sat, 03 Jan 2009 10:56:45 +0000 http://allfinancialmatters.com/?p=3061#comment-394488 DCA is a bit of a myth. Analysis has shown that provided you expect to earn a higher average return in the stock investment than you will have sitting in cash, you should invest immediately, rather than DCA in and keep a large lump of cash in the meantime. DCA will work out better than lump sum investing if the market drops, then recovers, or drops and keeps dropping. But it's worse if the market rises and then falls, or keeps rising. As the market is expected to rise over the long term (otherwise we wouldn't invest at all), DCA is overall a poorer strategy for maximising investment returns. Anyhow, in practice very few people (except those winning a lottery or getting an inheritance) have a lifetime's worth of savings sitting as cash at age 20 and have to choose between true DCA investing or putting it all into their desired asset allocation in one hit. The reality is that people think that they are dollar cost averaging when they are actually investing 100% of their savings each month via 401K plans or similar. The only real benefit of DCA is the "sleep well at night" factor. If you have a moderate sized lump of cash to invest, using DCA over a period of months or years will guarantee you don't buy at the peak and have to watch your investment crash and burn. But, most of the time, this strategy will produce lower returns than investing the entire intended amount at the start of the period. DCA is a bit of a myth. Analysis has shown that provided you expect to earn a higher average return in the stock investment than you will have sitting in cash, you should invest immediately, rather than DCA in and keep a large lump of cash in the meantime. DCA will work out better than lump sum investing if the market drops, then recovers, or drops and keeps dropping. But it’s worse if the market rises and then falls, or keeps rising. As the market is expected to rise over the long term (otherwise we wouldn’t invest at all), DCA is overall a poorer strategy for maximising investment returns.

Anyhow, in practice very few people (except those winning a lottery or getting an inheritance) have a lifetime’s worth of savings sitting as cash at age 20 and have to choose between true DCA investing or putting it all into their desired asset allocation in one hit. The reality is that people think that they are dollar cost averaging when they are actually investing 100% of their savings each month via 401K plans or similar.

The only real benefit of DCA is the “sleep well at night” factor. If you have a moderate sized lump of cash to invest, using DCA over a period of months or years will guarantee you don’t buy at the peak and have to watch your investment crash and burn. But, most of the time, this strategy will produce lower returns than investing the entire intended amount at the start of the period.

]]> By: thomas http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394454 thomas Sat, 03 Jan 2009 07:44:18 +0000 http://allfinancialmatters.com/?p=3061#comment-394454 People who stop investing in their 401k are extremely shortsidhted and will be the ones asking for government handouts when they retire. I'm happy to be investing at a low (but hopefully not too much lower) time period. It's definitely offsetting the high prices of 2007 and early 2008! I am ready to ride this out and enjoy my returns in the future. People who stop investing in their 401k are extremely shortsidhted and will be the ones asking for government handouts when they retire.

I’m happy to be investing at a low (but hopefully not too much lower) time period. It’s definitely offsetting the high prices of 2007 and early 2008! I am ready to ride this out and enjoy my returns in the future.

]]> By: cnett http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394450 cnett Sat, 03 Jan 2009 06:31:22 +0000 http://allfinancialmatters.com/?p=3061#comment-394450 I work with a few people who have stopped contributing to their 401k because they are losing money. They do not realize that they are buying more shares at bargain prices. Here in a year or two, their 401(k)s will be worth substantially more b/c of DCA. I work with a few people who have stopped contributing to their 401k because they are losing money. They do not realize that they are buying more shares at bargain prices. Here in a year or two, their 401(k)s will be worth substantially more b/c of DCA.

]]> By: Jason Bontrager http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394430 Jason Bontrager Sat, 03 Jan 2009 00:45:51 +0000 http://allfinancialmatters.com/?p=3061#comment-394430 DCA is the way to go. I've been doing that for several years now. The crash has hurt (in theory...not so much in practice as I have had no immediate need of the money) but calculating the value of my current stock in pre-crash (and eventually recovered) prices makes me happy:-). DCA is the way to go. I’ve been doing that for several years now. The crash has hurt (in theory…not so much in practice as I have had no immediate need of the money) but calculating the value of my current stock in pre-crash (and eventually recovered) prices makes me happy:-).

]]> By: El Cheapo http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394395 El Cheapo Fri, 02 Jan 2009 22:22:18 +0000 http://allfinancialmatters.com/?p=3061#comment-394395 The same could be said for real estate. A bit sobering indeed! The same could be said for real estate. A bit sobering indeed!

]]> By: rubin pham http://allfinancialmatters.com/2009/01/02/how-long-will-it-take-to-get-even/comment-page-1/#comment-394386 rubin pham Fri, 02 Jan 2009 21:34:59 +0000 http://allfinancialmatters.com/?p=3061#comment-394386 if the decline of the american empire is here to stay, you can expect 5 years or longer. if not, then i say 3-7 years. if the decline of the american empire is here to stay, you can expect 5 years or longer.
if not, then i say 3-7 years.

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