DCA is a good idea because of the math, unless you are willing to bet you’re buying at the bottom of the market for the next year or so, and as long as the amounts are sufficient that the transaction costs don’t comprise a significant portion of the investment.
Markets are volatile so if it goes up say 10% for the year, but not in a straight line, here is an example of what it could look like. Jan 1,000 Feb 1,100 Mar 1,000 Apr 900 May 800 Jun 900 Jul 1,000 Aug 1,100 Sep 1,000 Oct 900 Nov 1,000 Dec 1,100
You buy 120 share of this fictitious security at 1,000 for $120k, and you end up at $132k value for a 10% return. You invest $10k/mos (allowing for fractional shares as in the case of a mutual fund here), and you actually end up buying 123 shares (123.11 actually) for a value of $135,421.
Of course it’s even better if the market is flat or goes down, and it won’t be as good as a lump-sum if the market goes up in a straight line (the market hardly ever goes up, or down, in a straight line though). If you’re buying a stock or an ETF, you’re talking about $5-10 per transaction in cost so you are paying $60-120 rather than $5-10 to do this, which is certainly worth it for larger amounts of money, but not at all worth it for smaller amounts. If you’re buying an open ended mutual fund, there often isn’t a separate transaction cost so it would be a moot point.
I’d still DCA in over 12mos, but maybe I was scarred by the dot com bust and the financial crisis.
If you keep the funds in a high-yield saving account while you DCA in then that would address a good portion of the 2.39% differential in return mentioned here, and the hypothetical portfolios examined were 60/40 stock/bond portfolios which would certainly smooth out the volatility whereas I’m thinking of an all equity portfolio. If you do a blended portfolio and rebalance periodically, then I’d agree it matters much less.
Thanks both for your input on DCA. Unfortunately I don't have a lump sum to invest so I guess it's a moot point for me right now, but it helps me to understand the arguments for and against.
Hatorian, I would be very interested to see your forex bible doc!
Thanks both for your input on DCA. Unfortunately I don't have a lump sum to invest so I guess it's a moot point for me right now, but it helps me to understand the arguments for and against.
Hatorian, I would be very interested to see your forex bible doc!
Yea. Sorry been busy. I’ll put it up shortly. It’s not the techniques that failed me. So the book is pretty technically sound. It was my own stupid emotions and over leveraging my positions that cost me money.
Thanks both for your input on DCA. Unfortunately I don't have a lump sum to invest so I guess it's a moot point for me right now, but it helps me to understand the arguments for and against.
Hatorian, I would be very interested to see your forex bible doc!
Yea. Sorry been busy. I’ll put it up shortly. It’s not the techniques that failed me. So the book is pretty technically sound. It was my own stupid emotions and over leveraging my positions that cost me money.
No rush! Yep I have been there (in crypto). Finally feel like I have control over the emotional aspect and now trying to nail down a strategy that works for me.
Man. I went Long on GBP/USD at 1.28 and closed it at 1.29. It’s up to 1.32. Kicking myself..
i also shorted USD/CAD at 1.34 and closed it st 1.33 and it’s down to 1.32.
made the right call on both trades but once again let my emotions(fear) get the best of me. Closed them too early to lock in small profits. If I kept the trades open I’d have made a killing in just a few days.
EDIT: This was made a few years ago so things may have changed. Also this does not constitute any actual financial advice. it is simply a guide i use for myself. I am not a certified financial planner/investor. the contents in this book are sourced from many 3rd parties that may or may not be 100% correct. ONCE AGAIN THIS DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. Please contact a financial planner or someone certified to do so. If you trade using anything in this document you do so at your own risk.
Silver lining though I’ve had 5 straight profitable trades in the past 2 weeks. I just need to trust my decisions and not close out too early.
Hey that is awesome. I have exited too early many times. Now I almost always just keep moving my stop loss up when I'm in profit until I get stopped out. Of course you can still get stopped out and have it continue higher but at least I don't feel like as much of a dope when that happens.
Thanks for sharing the guide, it looks extensive! How long did it take you to learn all this? I look forward to going through it.
Silver lining though I’ve had 5 straight profitable trades in the past 2 weeks. I just need to trust my decisions and not close out too early.
Hey that is awesome. I have exited too early many times. Now I almost always just keep moving my stop loss up when I'm in profit until I get stopped out. Of course you can still get stopped out and have it continue higher but at least I don't feel like as much of a dope when that happens.
Thanks for sharing the guide, it looks extensive! How long did it take you to learn all this? I look forward to going through it.
Yea I should have just moved my stop loss to my open position.
For basic, conventional financial advice I like the Money Girl podcast from Quick and Dirty Tips. Also, the NPR Life Kit - Secrets of Saving and Investing podcast only has a few episodes but the one called "Your Cheat Sheet For Smarter Investing" is great and basically tells you exactly how to set up a balanced portfolio of index funds. I think that would be a great place to start.
For basic, conventional financial advice I like the Money Girl podcast from Quick and Dirty Tips. Also, the NPR Life Kit - Secrets of Saving and Investing podcast only has a few episodes but the one called "Your Cheat Sheet For Smarter Investing" is great and basically tells you exactly how to set up a balanced portfolio of index funds. I think that would be a great place to start.
Is it dumb to buy stock in a company that's currently in Chapter 11? Cause that's kinda what I want to do right now. Weatherford stock is down to 2 cents a share so I was gonna buy 3,000 shares for like $60 bucks. Not sure how the Chapter 11 thing works but what the hell.
By all that’s holy just put your money in Vanguard index funds and keep contributing to them regularly as able. Don’t even follow the market until it gets to be nearer the time where you need to live off that money. Do not try to time the market.
If you must show your investing acumen to the world, have a separate pot of money you use for your “bets.”
Did somebody say crypto? There is no point in 2019 in investing in cryptocurrency, because of its volatility. But you can threat with it like short-term deals. This is the only opportunity to make money here. Also I highly advice to you use cryptobots like in this list https://safetrading.today/bots/crypto-trading-bots/ and be subscribed on couple telegram groups.
Comments
Markets are volatile so if it goes up say 10% for the year, but not in a straight line, here is an example of what it could look like.
Jan 1,000
Feb 1,100
Mar 1,000
Apr 900
May 800
Jun 900
Jul 1,000
Aug 1,100
Sep 1,000
Oct 900
Nov 1,000
Dec 1,100
You buy 120 share of this fictitious security at 1,000 for $120k, and you end up at $132k value for a 10% return. You invest $10k/mos (allowing for fractional shares as in the case of a mutual fund here), and you actually end up buying 123 shares (123.11 actually) for a value of $135,421.
Of course it’s even better if the market is flat or goes down, and it won’t be as good as a lump-sum if the market goes up in a straight line (the market hardly ever goes up, or down, in a straight line though). If you’re buying a stock or an ETF, you’re talking about $5-10 per transaction in cost so you are paying $60-120 rather than $5-10 to do this, which is certainly worth it for larger amounts of money, but not at all worth it for smaller amounts. If you’re buying an open ended mutual fund, there often isn’t a separate transaction cost so it would be a moot point.
If you keep the funds in a high-yield saving account while you DCA in then that would address a good portion of the 2.39% differential in return mentioned here, and the hypothetical portfolios examined were 60/40 stock/bond portfolios which would certainly smooth out the volatility whereas I’m thinking of an all equity portfolio. If you do a blended portfolio and rebalance periodically, then I’d agree it matters much less.
Hatorian, I would be very interested to see your forex bible doc!
i also shorted USD/CAD at 1.34 and closed it st 1.33 and it’s down to 1.32.
made the right call on both trades but once again let my emotions(fear) get the best of me. Closed them too early to lock in small profits. If I kept the trades open I’d have made a killing in just a few days.
https://docs.google.com/document/d/1ojsX5MwCQvdXyV2mWrl_ntCb_malK-xhOpkLv_Oo0Oc/edit?usp=sharing
EDIT: This was made a few years ago so things may have changed. Also this does not constitute any actual financial advice. it is simply a guide i use for myself. I am not a certified financial planner/investor. the contents in this book are sourced from many 3rd parties that may or may not be 100% correct. ONCE AGAIN THIS DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. Please contact a financial planner or someone certified to do so. If you trade using anything in this document you do so at your own risk.
Thanks for sharing the guide, it looks extensive! How long did it take you to learn all this? I look forward to going through it.
Took me me a while to make it.