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Old 02-25-2010, 06:35 PM   #21
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I admit it, I drink the Vanguard Koolaid. As stated by others, discouraging frequent buying and selling lowers costs for other VG customers (me ). I do 99% of my stuff on line, but I've never had a problem with them.

I will also say that I love Fidelity's customer service. I deposited two checks at a brick and mortar branch a few miles from my house yesterday and today when I couldn't buy some ETFs on line, I called and they explained that there is a 4 day hold on checks, but they'd make an exception for me. They made the trades, waived any phone trading charges and asked if there was more that they could do. Needless to say I was very pleased.
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Old 02-25-2010, 07:17 PM   #22
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So you can buy as frequently as you want as long as you haven't recently sold that same fund that you're now trying to buy.

I've been thinking of a weird idea. Since I bought the Vanguard Emerging Markets ETF a month ago I've been tracking its day to day price movements, and it's ridiculously volatile day to day. Movements of 2-3% per day are no uncommon. So that got me thinking, what if one did dollar cost averaging every day with a fund. Just set up one of those automatic investment programs through vanguard for every day of the month, or every other day if you want. You'd have to do this with a fund not an ETF to avoid the $20 trade but does anyone see a problem with this?
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Old 03-07-2010, 07:16 AM   #23
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Originally Posted by John Galt View Post
So that got me thinking, what if one did dollar cost averaging every day with a fund. Just set up one of those automatic investment programs through vanguard for every day of the month, or every other day if you want. You'd have to do this with a fund not an ETF to avoid the $20 trade but does anyone see a problem with this?
Don't really see a problem nor a benefit....unless your investment time horizon is very short. If you are committed to a long-term investment strategy then DCA'ing into any given fund every day, every 2 weeks, or even every year should have similar benefits as long as you can avoid high transaction fees.
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Old 03-07-2010, 10:18 AM   #24
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I did an excel experiment with the closing prices of Vanguard's emerging markets ETF (VWO). I compared daily Dollar Cost Averaging (DCA) to weekly DCA and monthly DCA.

First, I considered investing $100 every day that the NYSE was open from the inception date of the fund (Mar 10, 2005) to the day I did the experiment (February 25, 2010). This came out to 1,250 days for a total of $125,000 invested.

Then, I considered investing this $125,000 using DCA every week over the course of 260 weeks, which comes out to a $480.77 weekly investment.

Last, I considered investing this $125,000 using DCA every month over the course of 60 months. The monthly investment varied according to the number of days in the month, but the total overall investment summed to $125,000.

The final results were as follows:

Final Value
Daily DCA: $153,514
Weekly DCA $153,288
Monthly DCA $152,271

Consider that these values exclude dividends from the fund, so the final result is only meant to show the relative merit of each type of DCA method. The results are what should be expected, with the final value increasing as investment frequency increases. However, the difference between the three methods are possibly not significant enough to bother with it. Also, the data (which I got off of Yahoo Finance) only extended back 7 years to the inception of the fund. A better experiment could be conducted using the price history of the S&P 500, but remember I used VWO because of the potential to exploit its extreme daily volatility.

I'm having a hard time figuring out how to attach the spreadsheet, so I guess you're going to have to take me at my word for this one.
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Old 03-07-2010, 10:25 AM   #25
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You have just shown that the sooner you invest in a rising market, the more money you will have at the end.

What if you started the daily DCA one month later than you did? 2 months later?

Or what if you started with a one-month contribution on the same day, then did the daily, weekly, monthly thing from that day onwards?

Or ... since ETF commissions would hurt you, what if you started with initial fund minimum purchase, then did your daily, weekly, monthly thing? Yahoo would have the adjusted price to include dividends paid by VEIEX.
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Old 03-07-2010, 11:25 AM   #26
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You have just shown that the sooner you invest in a rising market, the more money you will have at the end.
Monthly DCA would mean investing a larger sum at the beginning of the month as opposed to that sum distributed throughout the rest of the month. Monthly DCA actually involves investing more in a rising market, since you're investing more sooner. Part of the reason that this DCA worked in favor of Daily DCA was because of the fact that there was a severe market drop between '03 and '10. If the price of VWO had been linearly increasing, then monthly DCA would have clearly outperformed daily DCA.

Quote:
Or ... since ETF commissions would hurt you, what if you started with initial fund minimum purchase, then did your daily, weekly, monthly thing? Yahoo would have the adjusted price to include dividends paid by VEIEX.
I was using VWO prices as an approximation of VEIEX. Obviously making around 150 trades a year at $20 a trade at Vanguard (or even $8 per trade for Flagship members) would completely eliminate any advantage that daily DCA might have by costing you thousands of dollars per year.

Also, including dividends or the initial fund minimum would have changed the final values of each method, but would not have made a difference in the relative performance of the methods, which was the purpose of the experiment, so I excluded these things for the sake of simplicity.
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Old 03-11-2010, 02:02 PM   #27
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I came late to this party and I know this wasn't a "bash VG" thread, so I'll be brief. First let me say that I plan to move everything I can to VG eventually because I believe, structurally, they are the best. Having said that, they DO have humans working for them. They've screwed up my requests more than once and it has been a real hassle. For instance, years I have some extra cash, I fund my kids' Roth IRAs at VG. One year, I sent the money with instructions and, since I don't have access to my kids account info online, I didn't check on what they did with it. Instead of crediting to the previous year as I had requested, they credited it to the current year. In the great scheme of things it wasn't a disaster, but it was NOT what I wanted and it cost my kids some money over their lifetime, I'm assuming. So, in the words of that great American Ronald Reagan, "Trust, but verify!"
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