Comments on: Three reasons dollar cost averaging does not work for me

By: Annamarie

Annamarie — Sat, 04 Feb 2012 19:21:49 +0000

Date : 31 Aug 2011Hi,I have i am a nwiebe in MF , with all the research i made have made a conclusion for my portfolio to contain the foll :1)ICICI Prudential Focused Blue-chip Equity : SIP of Rs. 20002) HDFC Equity-G : SIP of Rs. 20003) HDFC Top 200 : SIP of Rs. 2000I am looking for 5 yr’s from now to continue with this portfolio.Is my portfolio ok or any change to be done in increasing / decr SIP amount ?Please advise.Regards,Abhishek.

By: Don’t average down and compound your problems

Don’t average down and compound your problems — Mon, 21 Nov 2011 23:34:10 +0000

[...] always been wary of averaging because most of the times it becomes a good excuse to hide losses, and I think this is especially true if you hold a penny stock, or some other lesser known small [...]

By: Jack Nelson

Jack Nelson — Thu, 19 Nov 2009 19:54:36 +0000

“…make it look like I am losing lesser money than I really am. This is purely psychological…”

It’s not purely psychological – it’s purely mathematical.

Stock X is worth $20/share in January. It declines in price $1/share/month so that in February it is worth $19 and by the end of the year it is worth $9.

1. If I invested $10,000 in January because I thought DCA was for dummies, then by the end of the year my 500 shares would only be worth $4500.

2. If I DCA the same $10,000 over 12 months however, by the end of the year, I’d own 733 shares worth $6600.

When this stock rebounds back to $20/share:
1. Without DCA, my 500 shares would be worth $10,00 again – A zero % gain.

2. With DCA, my 733 shares would be worth $14,655 – A %46 gain.

I’ve DCA my way to a 140% return with Ford the last couple years. If I had followed the advice here, I’d only be up about 10% or so now.

By: Mark Wolfinger

Mark Wolfinger — Tue, 13 Oct 2009 15:51:31 +0000

Of course that’s not bad.

But what do you do when you buy more as the price declines. Then buy more as it declines again. Then buy more…

Not all stocks recover.
Some companies go out of business
Some companies are surpassed by competitors
Some lose out to new technology

Buying ‘low’ is fine; what do you really know when it’s ‘low’

The idea of buying low is consistent with DCA.

By: Manshu

Manshu — Tue, 13 Oct 2009 00:15:28 +0000

Well, I keep hearing about market timing and how it is all bad and everything, but I am not so convinced anymore.
You buy something when the price goes down and sell it when the price goes up. Is it really timing? And even if it is; is it really that bad?

By: Mark Wolfinger

Mark Wolfinger — Mon, 12 Oct 2009 18:55:42 +0000

I’m not a fan of dollar cost averaging (DCA). To me, the decision on what to buy is independent of the calendar.

Nevertheless, look at point 2. It’s OK to buy something else. One of the ideas behind DCA is that you do invest, based on the calendar. In other words: don’t try to time the market. But there is no suggestion that you must buy the same asset. None.

Buy whatever suits you. DCA tells you to buy something. Anything.