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Show HN: Simulate dollar-cost averaging in any mix of stocks
- notpushkin 4y agoIt's a nice playground. One thing I would do differently though is, allow selecting multiple “categories” of stocks, e. g. both Technology and Finance. Right now selecting one will de-select the other (but you can add more shares from other categories manually).
- kareemsabri 4y agoThat's good feedback, we can do that pretty easily.
- savrajsingh 4y agoCan you add a comparison stat for "if you invested all at the start"
- bobbob1921 4y agoThis would be great! (But I think it might go against the product that they are selling or plan to be selling on this app/site)
- kache_ 4y agoDollar cost averaging is great psychologically But there's so much randomness in the system it doesn't really matter Just yeet your money dawg, stop thinking.
- 5350-uiop-1130 4y agonah, think i will just lump sum buy the market bottom
- grubobeats 4y ago[dead]
- kareemsabri 4y agoNice work. Shill away :)
- grubobeats 4y agoThanks! :)
- pyrrhotech 4y agoIMO it's easier and less work to outperform the indices with a combination of passively holding ETFs like VTI / VOO and strategic hedging based on quantitative leading indicators of economic trouble rather than trying to pick individual stocks. It's also more tax-efficient since you can continue to defer gains in the held ETFs while hedging with Section 1256 contract futures or options instead of constantly trading in and out of individual stocks and being hit with a lot of capital gains tax. My system is down -1.58% this year compared to -17.39% for the SPX for a nearly 16% outperformance margin. I've documented the results and information about it here: https://grizzlybulls.com/models/vix-ta-macro-mp-extreme https://grizzlybulls.com/models/vix-ta-macro-mp-extreme
- bdkoepke 4y agoPSA: Outside of stat arb and heavily leveraged market making with teams of PhDs, 60% annualized CAGR doesn't exist. In the real world, anything above 10% over the long-term (in-sample over 50 years), is extremely likely to be spurious and won't repeat.
- thunky 4y agoI'm skeptical: 1) Your performance chart starts right after the 2009 bear market and includes a huge bull market run up until the current slowdown where it then starts to match SPX. The straight line up until the drop starting in 2021 suggests that your model may not perform so well in the future. 2) You don't include the penalty from all the short term capital gains taxes you're generating. 3) If you can really generate those returns you wouldn't need to sell market timing signals.
- pyrrhotech 4y agoHealthy skepticism is warranted! I've answered several of these in previous HN comments such as https://news.ycombinator.com/threads?id=pyrrhotech&next=30126208#30089002 https://news.ycombinator.com/threads?id=pyrrhotech&next=3012... and https://news.ycombinator.com/threads?id=pyrrhotech&next=30126208#29999406 https://news.ycombinator.com/threads?id=pyrrhotech&next=3012... but in brief: 1. Vix Futures are a huge part of all the VIX based models. Vix Futures came out in 2004 but the earliest intraday per-contract data publicly available is in 2009 which is needed to calculate the futures curve. 2. Slippage is included in the modeled returns but taxes are not, as mentioned in the tooltip. Taxes are not included because they vary widely by location, account type and implementation method. I've also written at large about how to minimize taxes on the blog. As a conservative estimate, feel free to multiply returns by 0.75x to get equivalent after-tax CAGR, but in most cases you'd beat this in real life. 3. Correct, and I make no guarantee that they will always be available. As of now, selling access to them in no way negatively impacts my own returns. I've met a lot of people in this journey and I enjoy leading a community and making an impact. I also make a significant amount of MRR that has grown substantially from the start of the year that gets reinvested into the models in my own account. I consider Grizzly Bulls to be a win-win alternative to the hedge fund industry for those interested in alternative investments. We've only ever had one Platinum member cancel, and given the model's underperformance in Q1 it was understandable. Since Q1, the model has been crushing the market, and it makes me happy to see our customers happy as well. Finally, as I mention several places, no one should ever expect any model to achieve 100% of its backtest performance, but there's enough leeway in the performance and drawdown figures to underperform the backtest and still generate substantial alpha, which has been my experience running them live for over 2 years now.
- lvl102 4y agoYou should never DCA when it comes to investments. That’s absolutely the wrong dimension to reference.
- throwaway290 4y agoFun categories. Is Pelosi still long NVDA though? I heard they sold off shortly before the export ban but didn't verify.
- Bostonian 4y agoThanks for posting. I tried it with stock and bond ETFs SPY and IEF and got the result "If you had invested $20/week evenly in these assets for the past 5 years, you'd have invested $5,200.00 and have $5,638.09 today, a return of 1.1X." Usually that would be expressed as a return of 10%, and the return would be reported to the nearest percent. It would nice to allow the user to specify unequal weightings, say $15/week in SPY and $5 in IEF. A general problem with showing the results of a dollar-cost averaging investment plan is that it gives more weight to later returns in the period, since that is when the most money was invested. It's true that people who are starting from $0 and saving regularly from earnings face this risk. Another simulation that is worth showing is having the full amount invested from the beginning. I assume you are familiar with https://www.portfoliovisualizer.com/ https://www.portfoliovisualizer.com/ , a comprehensive investment simulator (that is not a mobile app).
- ctchocula 4y agoAgree with the first point. Either time-weighted return or IRR gives a more meaningful estimate of the return than simply dividing the final value with total amount invested ($5,200).
- dwmcc 4y agoHey, thanks for taking a look! The tool you linked looks quite comprehensive, but we wanted to build something simple and approachable for beginners. Good callout on custom-weighting, that's on the list to add in the future.
- Havoc 4y agoThe 1.1x is money on money convention
- intrasight 4y agoI don't understand your "a general problem" statement. I would not consider it a problem to show correct results. Someone saving for retirement just wants to know the course-grained results. Having the chart split those results by the period that funds were invested would make for a very visually cluttered chart. But I agree that it would be interesting to some. A few years back, I created a simulator that let's you simulate both putting money in - lump sum and incrementally - and also take money out. I'll see if I can find a link to a live version.
- sixQuarks 4y agoHow do you not have Tesla under the technology defaults? It’s literally the most heavily traded stock in the entire market. SMH
- dwmcc 4y agoFixed. Good callout!
- sixQuarks 4y agoSorry, didn’t mean to be snarky. There is a lot of Tesla hate in this forum and I thought maybe you were part of this bias.
- Cthulhu_ 4y agoI'll bite; shouldn't Tesla be lumped with other car manufacturers instead? While tech is a big aspect of their cars, I wouldn't say tech is their primary product. And if electric vehicles and self-driving capability is the discerning factor, then other car manufacturers should be on there as well.
- sixQuarks 4y agoThen Apple should be listed under phone manufacturers
- Raidion 4y agoIt's weird. Tesla really just a car company but Tesla (as a stock) is priced like the market expects they solve (of some definition of "solve") the self driving car problem sooner than their competitors. Ford/Toyota/etc can almost certainly build better cars, but it doesn't have the technology focus, culture, or data to make it as big of a player in some hypothetical multi-trillion self driving car industry. Not saying Tesla doesn't have some advantages over incumbents in terms of battery supply chain, etc, but those are reasonably solvable problems given enough money and time. But it's hard to catch up to the amount of data/machine learning on that data Tesla has done.
- dragontamer 4y agoOr just buy SPY or VTI and go braindead with it. Hard to beat dollar cost averaging the entire stock market, which is what VTI represents. -------- Rebalancing is done between asset classes. But if you are going to rebalance, it's more efficient to buy target date funds.
- kube-system 4y ago> Hard to beat dollar cost averaging the entire stock market Easy! Dollar cost average a leverage fund that invests in the entire stock market. TQQQ beats SPY over the long term.
- itsoktocry 4y ago>invests in the entire stock market. TQQQ indexes the Nasdaq 100, not remotely close to "the entire stock market".
- kube-system 4y agoTrue, and SPY is only S&P 500. But you get my point.
- M3L0NM4N 4y agoI DCA TQQQ, but you have to know that in 2008, for example, had a 96% drawdown. The triple leverage can basically wipe out your entire equity, so you need a strong stomach.
- kube-system 4y agoI just do it in my play money account. Casual day trading wastes too much time that I could otherwise waste on HN, so I risk my money with TQQQ instead.
- deleted 4y ago[deleted]
- francisofascii 4y ago
- lordswork 4y agoTangentially related: Does anyone know of a similar tool for comparing DCA vs. lump sum investing over a given time period?
- Raidion 4y agoI mean, it's probably not as clean as you'd like, but it's a ~15 minute exercise in google sheets. Hint: Use the =GoogleFinance command. Lump Sum is just the rate of return from that date * initial investment. DCA is just that same lump sum equation but done/averaged out as many times as you've DCAed.
- zhdc1 4y agoYou can use Portfolio Visualizer (portfoliovisualizer.com) for this.
- b-lyons 4y agoThat's avery nice site and they seem to use Alpaca on the back-end, who seem to be doing good work. Many poeple seem to be saying they tried it the simulation out with broad ETFs, and that's a good use case. But I think many investors advise against DCA, because it results in you increasing expure to companies in trouble, going into bear markets or even bankruptcy. So for the riskier single stocks at least this seems to have a lot of survivorship bias. If we include some compaies that have done very poorly or gone bankrupt you would get a better picture of the effect of following this plan for individual stocks. You never know! It is true that investing all at once, rather than DCA, you also lose 100% in a bankruptcy, but "dollar cost averaging" seems to imply that buying at the lower prices (and thus bringing down your average price) is the benefit of the approach. In fact it is sometimes the main danger.
- GoldenMonkey 4y agoAirBNB did poorly in the simulator. Losing 23% of it's value.
- lui8906 4y agoDCA has positives and negatives. Positive, you are averaging out the risk by spreading out your purchases and averaging into your position. Negative, time in the market beats timing the market, therefore you are better to have all your money you intend to invest in the market right away so you can enjoy appreciation, dividends etc If you have a large lump sum to invest it can be better to buy in one go or in a shorter period. However if you earn money over time and look to invest, it makes sense to DCA each month you receive your salary rather than waiting to time the market. NFA DYOR :)
- hinkley 4y agoIf you're in your early 20's and reading along in this thread, I have some wisdom to drop on you: The real value of investing at a young age is not compound interest and having another 5-10 years of time with part of your money in the market. For most of us our earning potential will keep going up until at least our 40's, so the number of dollars you have later will swamp whatever you can save now. The real value of starting at 25, 24, 23 is that you only have a little money to invest, and when you lose it, it will subjectively hurt more. If you wait until 30 you'll be gambling a larger pile of cash without those hard won lessons to keep you out of trouble. The money you invest at the beginning increases the effectiveness of the much larger pile of money you can invest 5 years in. If you read enough personal finance articles, aimed at real humans, you will start to get a feel for the way in which finances, like dieting or time management, has a much larger psychological factor that the objective bean counters dismiss as if the math is all that matters. What matters most is you.
- dom96 4y agoInvesting every week? Don't most invest apps/providers only allow investment on a monthly basis? Might be better to simulate that
- cj 4y agoI use Wealthfront and currently investing every Mon, Weds, and Fri, 3x weekly.
- kareemsabri 4y agoNo you can invest weekly in most apps.
- dwmcc 4y agoThe buy timing in the simulator matches up with the cadence in the app we're building - Share - which facilitates DCAing into strategies.
- amenghra 4y agoDoes it take dividends into account?
- evelynsalt 4y agoI am pretty sure this simulator doesn't reinvest dividends. I think it is an ad for an app doesn't reinvest dividends either.
- amenghra 4y agoThat was my guess too. It can skew the result quite a bit depending which stock you are looking at. Eg BNS historically hands out 2-3% per year in dividends, and that’s just one randomly chosen “high yield” stock.
- funnym0nk3y 4y agoHas anyody done a thourough calculation with statistics and all? Just from intuition DCA would yield less than one lump if the expectation value is larger than 0. But then there is variance. If the asset is volatile enough that even a short period of DCA investing is bringing down the price a bit, I assume.
- senko 4y ago> Has anyody done a thourough calculation with statistics and all? Yes. Watch https://www.youtube.com/watch?v=X1qzuPRvsM0 https://www.youtube.com/watch?v=X1qzuPRvsM0 and read the papers referenced in the video.
- nly 4y agoDCA gives you the best chance of getting mean/average returns, not the best returns. If the market goes up year and year then obviously lump sum investing is best, but it doesn't. It goes through periods of over and under performance and then returns the mean. In any case, it's academic for most us investing from our salaries. DCA isn't a choice.
- roflyear 4y agoI also wonder what risk-adjusted is for DCA. I figure DCA is also more attractive in volatile markets, but don't have anything to back this up.
- kareemsabri 4y agoThe benefit of DCA (in my mind) is avoiding market timing risk. Sure, as another commenter pointed out, if a stock is only going up you better just get in and ride it up. But who knows? If you buy at the peak of a bubble, like in January 2022, it's not so great. If you're not studying the market all day, you can't really predict where it's gonna move (or even if you are). And of course, many of us don't have a big chunk of cash sitting around waiting to get invested.
- ricardobeat 4y ago
- shaftoe444 4y agoReally nicely presented app. Does it, or can it, include reinvesting dividends, which is surely the real secret of long term investing?
- dwmcc 4y agoThank you, really appreciate it! Yes, we are working on adding dividend reinvestment.
- shaftoe444 4y agoThat would make it incredibly useful for me. The more I think about it the more I see how tricky it would be to gather accurate historic data about dividend payouts. Good luck with it!
- xnx 4y agoDollar cost averaging is a psychological strategy, not a financial one.
- tunesmith 4y agoToo many people think DCA means starting with a lump sum and then feeding it into the market over time. That's not DCA. Just look at it this way - any time you get a sum of money that you intend to invest in the market, invest that entire sum immediately. DCA just means you regularly/periodically get sums of money that you then invest immediately.
- bhelkey 4y agoFrom bogleheads: '[Dollar Cost Averaging] is the technique of dividing an available investment lump sum into equal parts, and then periodically investing each part.'[1] [1] https://www.bogleheads.org/wiki/Dollar_cost_averaging https://www.bogleheads.org/wiki/Dollar_cost_averaging
- tunesmith 4y agoYeah, I'm a big fan of bogleheads, but that definition is just wrong. There's a big difference between splitting an available sum into equal parts and then periodically investing, and periodically investing money as it becomes regularly available. Dollar Cost Averaging technically refers to neither. It simply refers to regularly investing a set sum (like $1000) at periodic intervals, as the price goes up and down. It refers to the average cost being less than the average price. As price goes down, that sum buys more shares. As price goes up, that sum buys fewer shares. But it says nothing about where the money comes from. People then try to apply that definition in two different ways: 1) Using it to regularly invest a periodic income stream, like a portion of your paycheck. Note that in this case the lump sum (the yearly salary) is not entirely available at the beginning. The money is invested as it arrives. 2) Using it to split apart an already-available lump sump into n equal parts, and then buying into the market n times at regular intervals. Note that in this case, a large portion of the lump sum is entirely available at the beginning, and is not invested as it arrives. Bogleheads is incorrect to phrase DCA as specifically dividing a lump sum into equal parts. It's not the common usage of DCA even on the Bogleheads forums or subreddits. And Bogleheads participants regularly chant that time in market is better than market timing. Splitting a lump sum over time is an example of market timing, since you are judging that later will be better than now. Bogleheads believe market timing is generally bad. They believe that definition #1 is generally good. They believe that definition #2 is generally bad. So that's where the terminology confusion comes in. People refer to #1 as DCA, and call DCA good, and then misunderstand and also say that #2 is good, when it's (generally) bad.
- MuffinFlavored 4y agoMaybe make the amount + period configurable (aka not hardcoded to $20/week)
- dwmcc 4y agoNoted - we're planning to add amount in the future. Regarding period, do you mean the cadence e.g. daily/weekly/monthly ?
- MuffinFlavored 4y agoThink about who your average dollar cost average-er is. People still working/getting paid. How often are most paychecks? Weekly, bi-weekly, semi-monthly, etc. Maybe people with quarterly bonuses? Probably don't need to overdo it. What would be super cool (and 100% out of scope for this) is like... Buying only on "red" days (people trying to time the market thinking they'll buy the dip, but ignoring buying the market on the way up) This can help people visualize how important consistency is when it comes to investments (or it can hypothetically show the opposite results on how blindly randomly buying stocks with no logic behind it might not perform the best, etc.) Maybe there are strategies where technical indicators can act as a precursor for the decision making on whether or not you should buy or hold out? But yeah 100% not in the scope of what you and your team are working on. :D
- bobbob1921 4y agoHi, great tool! And great interface/gui. Two suggestions if you don’t mind: 1-add the ability to enable/disable dividend reinvestment (I assume it’s enable by default/currently). 2-increase the timeframe options beyond five years. Thanks (I think you’re on to an actual product here)
- MuffinFlavored 4y agomight as well add ability to compare compounded returns against inflation adjusted dollars too :D
- dwmcc 4y ago
- bottlepalm 4y agoNeat, would be nice to see the average annual return for the time period selected.