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Old 02-12-2008, 01:53 PM   #21
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I'd decide on asset allocation (60-40 is what I heard).

In 20 years the exact entry point 240 months ago won't matter. Whether there is one data point (lump sum) or multiple (DCA) will not have a huge effect on the return.
Which means that DCA is not worth doing if we are talking long periods.........
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Old 02-12-2008, 01:55 PM   #22
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I have never DCAd, either in my portfolio or my clients. There's an old adage I heard from a guy I used to work with that had 43 years in as an advisor. He said: "The best time to invest in the market is when you have the money to do so"...........

Sounds too simple, but I think DCA may help on the downside,but not the upside. There are economies of scale in lump sum investing...........

The only time I DCA is when I have to... the 401(k) kind of makes you do it that way... all other money goes to where it should when I get it.
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Old 02-12-2008, 02:00 PM   #23
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How about Millionaire Mom?

Ha

What happened to her anyhow... kind of dropped off the radar.. I think my 'BS' meter was working...

BUT, someone who does it for a short time is more 'lucky' than good... for me you would have to show you were doing it on almost all big drops.. because you knew something... anything else is just guessing and by stats there will be a certain % who guessed right...

And she never did say how much she had lost since Oct or YTD.... which would be very interesting to see...
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Old 02-12-2008, 02:01 PM   #24
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While I believe the studies that say lump sum will give you on average the best lump sum at the end, I sometimes do big purchases in three transactions, separated by a week or two. It's a compromise that makes me feel less exposed even though it probably costs me a little in extra transaction fees and opportunity costs, and probably doesn't offer any real risk reduction. It's a small price to sleep well at night.
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Old 02-12-2008, 02:44 PM   #25
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While I believe the studies that say lump sum will give you on average the best lump sum at the end, I sometimes do big purchases in three transactions, separated by a week or two. It's a compromise that makes me feel less exposed even though it probably costs me a little in extra transaction fees and opportunity costs, and probably doesn't offer any real risk reduction. It's a small price to sleep well at night.
I used to have a comparison piece between two investors, one who invested on the BEST market day of each year (Unlucky), and one who invested on the WORST (Lucky). In the end, their portfolios were almost the same in value and return..........I'll see f I can find it........
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Old 02-13-2008, 09:08 AM   #26
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Well, I put $100k into the market into funds a couple months ago and am already down almost 10%. Someone tell me why I wouldn't have been better off DCA'ing into the market?
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Old 02-13-2008, 09:18 AM   #27
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Here's your answer:

FPA Journal - Between the Issues - Missing the Ten Best?
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Old 02-13-2008, 09:30 AM   #28
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Let's see:

On the one hand, a proverbial "guy on the internet" says he had a bad result by investing a lump sum a couple of months ago .

On the other hand, countless analyses, expert opinions, and modeling studies say lump sum works out best most of the time over the long run with ample data to support that.

It's about probabilities and decision making. You can bet and lose even though you are holding a royal flush, but I'd make that bet every time.

Do whatcha gotta do.
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Old 02-13-2008, 10:12 AM   #29
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LOL! "A guy on the internet"...you make it sound like I'm making it up. The market hasn't been correcting as of late?
What you are stating is the generally accepted viewpoint of some "experts". BTW, I find it really interesting here how "experts" in print on the internet get so much more credibility than the investment advisor who calls you on the phone soliciting your business. Does "expert" here equate to distance?
Anyway, so an "expert opinion" states it's not a good idea, and I have first hand knowledge (which is easily verified just by looking at a three month chart of the S&P), and I tell you the portfolio has dropped.
So we have theory vs. reality. Which do you accept?

BTW, you can't lose with a royal flush.
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Old 02-13-2008, 10:16 AM   #30
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BTW, you can't lose with a royal flush.
Guess you never played poker with a guy named 'Vinnie' from NJ...
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Old 02-13-2008, 10:26 AM   #31
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LOL! "A guy on the internet"...you make it sound like I'm making it up. The market hasn't been correcting as of late?
What you are stating is the generally accepted viewpoint of some "experts". BTW, I find it really interesting here how "experts" in print on the internet get so much more credibility than the investment advisor who calls you on the phone soliciting your business. Does "expert" here equate to distance?
Anyway, so an "expert opinion" states it's not a good idea, and I have first hand knowledge (which is easily verified just by looking at a three month chart of the S&P), and I tell you the portfolio has dropped.
So we have theory vs. reality. Which do you accept?


Well, the standards must be pretty low, Kiyosaki is on Yahoo! expousing investment advice.........
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Old 02-13-2008, 11:08 AM   #32
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There are so many purported "experts" on the internet. I guess I need to start my own website, make the same statement, and then people will believe me when I say it.
I can't stop laughing about being "the guy on the internet". ...someone quoted Moshe Milevsky. Well Moshe also is a huge proponent of living benefits within a variable annuity. NOW how many on here will listen to whatever Moshe says?
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Old 02-13-2008, 11:25 AM   #33
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So we have theory vs. reality. Which do you accept?
Hey, what you gonna believe? The experts, or your lying eyes?

Ha
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Old 02-13-2008, 11:53 AM   #34
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Old 02-13-2008, 11:57 AM   #35
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I don't believe the experts, or the guy on the Internet. I believe the numbers. Go analyze the numbers yourself. I program stock investing alg's as a hobby. Haven't done one in about two years now, just to many other things going on.. but... One of the ones I did check was, DCA vs. Lump Sum.

Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.

Yes there are windows of time where it is better to have put it in over a year. Is there some sort of formula you can come up with to spot those periods before they have happend?(hindsight is 20/20) If you can, you are now a billionaire.

Its easy today to say "I knew the market was overvalued 6 months ago, and was going to fall". The problem is your just as likely to be right as wrong. If you can really predict where the market is going in the next year, you aren't on this board posting.. you're on your own private island spending your billions.

Going all in (Lump Sum), is like gambling at vegas, only you are the house. The house always eventually wins. Sometimes the house loses for a while, but in the end it wins. (If it didn't, it wouldn't be there anymore)

Some people don't want to gamble at all, even if they know their odds are pretty good. They want the "safe" thing. Thats fine... for them, DCA is fine.

I have a specific asset allocation. When I got 60K from selling my house, I put it into that allocation (after futzing over this exact question and checking the numbers)... I put it all into the asset allocation, and went to bed. (> 80% is in stocks). Slept great.

If you won't sleep great, DCA the money.

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Old 02-13-2008, 12:05 PM   #36
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I don't believe the experts, or the guy on the Internet. I believe the numbers. Go analyze the numbers yourself. I program stock investing alg's as a hobby. Haven't done one in about two years now, just to many other things going on.. but... One of the ones I did check was, DCA vs. Lump Sum.

Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.
-d.
I think most of us would concede that. My quibble is with the assumption that the long term is all that matters. And the assumption that all market climates are created equal.

Once you have committed to retiring, you are in reality a lame duck when it comes to "the long term". Much shorter terms now matter to you, and early damage can quite possibly sink your retirement.

Safety first would be my motto. Of course if the allocation makes much use of cash like instruments timing is less critical.

Ha
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Old 02-13-2008, 12:33 PM   #37
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Its pretty easy to look at, I have 50K, do I put it in immediatly, or over a year (or two), or 6 months.. or... and guess what... historically, more often than not, its better to put the money in immediatly.

Yes there are windows of time where it is better to have put it in over a year. Is there some sort of formula you can come up with to spot those periods before they have happend?(hindsight is 20/20) If you can, you are now a billionaire...Going all in (Lump Sum), is like gambling at vegas, only you are the house.
Well stated, dg -- especially the Las Vegas analogy, where you're the house . I agree -- citing individual examples where the evidence-based strategy didn't do as well for a spell is of no consequence -- of course they occur, and unless you can predict them, they are a nonentity in the long term decision.

By the way, I don't mean to say that making a choice which runs contrary to the best evidence is "wrong." It just reflects a different set of values and priorities from what the evidence is intended for. In this case, if you look at total return, the evidence tells me that lump sum is generally the best choice based on the evidence and probabilities. But once you inject other value priorities (e.g. the "sleep well" factor, low tolerance for short term remorse or volatility, time horizon in question, etc.) it becomes a totally different, individual and subjective beast. That's fine, and it's also personal. My best decisions incorporate both pieces; when I screw up it's often because I ignored one or the other.
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Old 02-13-2008, 12:56 PM   #38
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Schwab did a little research on the subject: The Costs and Benefits of Waiting to Invest. Also, check out this Moneychimp calculator Does Dollar Cost Averaging Work.

- Alec
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Old 02-13-2008, 12:59 PM   #39
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Well since most here don't believe in technical analysis, trying to argue that timing the market has merit, is pointless.
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Old 02-13-2008, 01:08 PM   #40
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Some of the most successful long term investors are P&C insurance comapanies like Cincinnati Financial and Markel Corp which by the nature of their cash flows are DCF investors.

As to the research, I think it was the bunny who showed that you can show pretty much anything with research. I know that if I were a mutual fund marketer or a brokerage, I would find me some research that showed that lump sum investing was best. For the simple reason that I at least will know that I will have those lump assets, and the associated fees and commissions, rather than some other, undeserving, company.

Another thing to look at carefully is the period chosen for the research. Clearly lump sum will outperform on a total return basis in a bull market. But will it in a 25 year bear?

Ha
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