4 ms·
"The costly myth of dollar-cost averaging" http://moneycentral.msn.com/content/P104966.asp http://moneycentral.msn.com/content/P104966.asp "When the market is
by vlad 18y ago
"The costly myth of dollar-cost averaging"
http://moneycentral.msn.com/content/P104966.asp http://moneycentral.msn.com/content/P104966.asp
"When the market is studied over long periods, dollar-cost averaging almost always produces lower returns than investing lump sums in diversified portfolios, and almost never reduces risk meaningfully."
I think the best advice I have heard is to think of stocks as buying companies. On the other hand, if one is putting in X dollars in a stock on a regular schedule, then that person is clearly not thinking strategically about stocks, but just sees the stock as a monthly expense that is better than spending it outright because you'll likely have at least something in the future remaining. This type of logic is used by financial professionals to get you to do business with them.
- Retric 18y agoIf you have a lump sum to invest then waiting to invest it to use "cost dollar averaging" is not really a great idea. However, if you compare your rate of returns over 30 years with the best and worst possible lump sum investments vs your rate of return from consistent inflation adjusted investing over 30 years the peaks and overall risk is far lower and the average expected return is higher. No approach can consistently beat the market investing lots of money over the long term. But some R/W profiles are better for small investors looking for a safe retirement than others. I would suggest most people start young and aim for a 98% chance to hit 90% of their inflation adjusted salary at 65. Getting there sooner is great, but not getting their at all is really bad so trying to time the market is not helping your odds.