Is the stock market going to tank?

[4matic]

Excellent trading website:

http://www.fullyinformed.com/dollar-...rmed-vanguard/

Dollar Cost Averaging Failure

To investigate Dollar Cost Averaging Vanguard studied two lump sum investments of $1 million and $20 million and ran computer simulations rolling these simulations every ten years starting in February 1926 and completing in December 2011. This means that all the major corrections and stock market crashes including 1929, 1932, 1973-74, 1987, 1998, 1999, 2000-2003 and 2008 were included in their Dollar Cost Averaging study.

They then compared the results against an investor who placed capital into stocks at set periods through the same time frames using the Dollar Cost Averaging method. The computer simulations were ran and analyzed. The same Dollar Cost Averaging algorithms used were on the US stock markets and on the United Kingdom and Australian stock markets.

The evidence against Dollar Cost Averaging was overwhelming. Dollar cost averaging fails as an investment strategy when compared to lump sum investing. Vanguard went even further in their report indicating that their studies show that dollar cost averaging ends up hurting more investors than it helps.

[DBdude]

wow

[gravitylover]

Excellent trading website:

http://www.fullyinformed.com/dollar-...rmed-vanguard/

Dollar Cost Averaging Failure

To investigate Dollar Cost Averaging Vanguard studied two lump sum investments of $1 million and $20 million and ran computer simulations rolling these simulations every ten years starting in February 1926 and completing in December 2011. This means that all the major corrections and stock market crashes including 1929, 1932, 1973-74, 1987, 1998, 1999, 2000-2003 and 2008 were included in their Dollar Cost Averaging study.

They then compared the results against an investor who placed capital into stocks at set periods through the same time frames using the Dollar Cost Averaging method. The computer simulations were ran and analyzed. The same Dollar Cost Averaging algorithms used were on the US stock markets and on the United Kingdom and Australian stock markets.

The evidence against Dollar Cost Averaging was overwhelming. Dollar cost averaging fails as an investment strategy when compared to lump sum investing. Vanguard went even further in their report indicating that their studies show that dollar cost averaging ends up hurting more investors than it helps.

In other words, go big or go home? Take that lump sum and put all (or at least most of it) in one place rather than spreading it around?

[DBdude]

no, dollar cost averaging means buying the same stock at set intervals of time to average out the purchase price

[Benny Profane]

Excellent trading website:

http://www.fullyinformed.com/dollar-...rmed-vanguard/

Dollar Cost Averaging Failure

To investigate Dollar Cost Averaging Vanguard studied two lump sum investments of $1 million and $20 million and ran computer simulations rolling these simulations every ten years starting in February 1926 and completing in December 2011. This means that all the major corrections and stock market crashes including 1929, 1932, 1973-74, 1987, 1998, 1999, 2000-2003 and 2008 were included in their Dollar Cost Averaging study.

They then compared the results against an investor who placed capital into stocks at set periods through the same time frames using the Dollar Cost Averaging method. The computer simulations were ran and analyzed. The same Dollar Cost Averaging algorithms used were on the US stock markets and on the United Kingdom and Australian stock markets.

The evidence against Dollar Cost Averaging was overwhelming. Dollar cost averaging fails as an investment strategy when compared to lump sum investing. Vanguard went even further in their report indicating that their studies show that dollar cost averaging ends up hurting more investors than it helps.

Damn. So they're saying that I should have put all of that ten mil inheritance in all at once?

99% of us don't have much choice.

[El Chupacabra]

Vanguard index funds.

/end

[huckbucket]

That study makes some underlying assumptions. First of all who the fuck would take 85 years to get all their cash into a market via DCA? Second of all, the benefits of compounding interest versus DCA require some minimum hold period probably on the order of several years. So while this fits beer30's timeframe, don't make the assumption that you're 6 month gamble is gonna be better off because you placed it all on red on one date.

[yeahman]

Go to Vegas and bet it all on black.

[gravitylover]

no, dollar cost averaging means buying the same stock at set intervals of time to average out the purchase price

Wait, I knew that. Thanks.

[Benny Profane]

Vanguard index funds.

/end

Vanguard has a few managed funds that have done well for a long time at low expense. The Wellseley Income fund is an example.

[El Chupacabra]

IMHO managed funds are not the way to go. Index + low fees for slow, steady, reliable investing.

[Benny Profane]

Good rule, but, not all managed is bad. Just most. Better rule is to use Vanguard, just Vanguard. You're not going to get ripped off there.

[liv2ski]

I think the question at this time should be how long will it take the stock market to tank again??? I have my shorts ready. Fuckin bring it already.
http://www.zerohedge.com/news/2015-0...s-nowhere-hide

[Benny Profane]

The thing about zero hedge is, how can they allow themselves to spew this end of the world shit so long? We're six years out and counting, and I see no bubbles outside of Chinese stocks, so, no crash around the corner. Just one long slow grind. Ask yourself. If the market does crash, where will all of that money flee to? I know. That's why it's the best game in town. No alternative. Well, reasonably safe alternative.

[4matic]

In other words, go big or go home? Take that lump sum and put all (or at least most of it) in one place rather than spreading it around?

Not one place but if you have a long term allocation you want to make just do the allocation and not leg into it, the basic premise is that if you are going to switch to a higher yielding investment do it now as you are losing return every day you wait. DCA in this strategy is just a feel good way that you are mitigating risk.

Note: The one theme that the most successful investors have made (Buffett, Soros, etc) is that they make big bets and avoid diversification.

[4matic]

The thing about zero hedge is, how can they allow themselves to spew this end of the world shit so long? We're six years out and counting, and I see no bubbles outside of Chinese stocks, so, no crash around the corner. Just one long slow grind. Ask yourself. If the market does crash, where will all of that money flee to? I know. That's why it's the best game in town. No alternative. Well, reasonably safe alternative.

Which game? The SPY is up about 1% since November. Cash is a strategy.

[huckbucket]

Note: The one theme that the most successful investors have made (Buffett, Soros, etc) is that they make big bets and avoid diversification.

This. Diversifying is just so ingrained. I gotta take a flyer one of these days and just load up on something I have high confidence in. For me that means ~40% of my investable assets. That's pucker time.

[Benny Profane]

Cash isn't a strategy. It's a shelter. It's losing money every day.

[yeahman]

Well you know the old saying, the market can stay irrational longer than you can stay solvent.

[rod9301]

Btw, the stocks are priced to deliver risk returns around 1.5% a year over the next 10 years.

So cash is a strategy that days, I will wait fit the fat pitch. Ie wait til the 10 year pe is under 10 , which implies returns in the 14% a year.

Out may be a few years though.
But there's no inflation, so you're ok.

This is the biggest advantage you have over wall street.
You can wait, they have to be invested al the time, because nobody will pay them a fee if the account is in cash.

If you look over the past 40 years, and you went to bonds evey time the 10 year p/e is over 20, and in stocks when it's under 8, you would have beaten the s&p by a factor of 3.

Yes this means you would have sold your stocks in 97, but so what?

You would have bought them back in 2002.

[4matic]

Cash isn't a strategy. It's a shelter. It's losing money every day.

Not in a deflation. A Swiss ten year bond has negative yield. Cash buried in a jar has a better return.

[Benny Profane]

Btw, the stocks are priced to deliver risk returns around 1.5% a year over the next 10 years.

So cash is a strategy that days, I will wait fit the fat pitch. Ie wait til the 10 year pe is under 10 , which implies returns in the 14% a year.

Out may be a few years though.
But there's no inflation, so you're ok.

This is the biggest advantage you have over wall street.
You can wait, they have to be invested al the time, because nobody will pay them a fee if the account is in cash.

If you look over the past 40 years, and you went to bonds evey time the 10 year p/e is over 20, and in stocks when it's under 8, you would have beaten the s&p by a factor of 3.

Yes this means you would have sold your stocks in 97, but so what?

You would have bought them back in 2002.

Pure market timing and hindsight. I prefer the Buffet approach as I get older. Hard to argue with his results. Good companies, well managed, in places with a semblance of the rule of law on your side. Then, wait.

[Benny Profane]

Not in a deflation. A Swiss ten year bond has negative yield. Cash buried in a jar has a better return.

Agreed, although, who the hell owns Swiss bonds? Deflation isn't here yet. At least not so bad that cash is king. Priced any houses lately?

[4matic]

Pure market timing and hindsight. I prefer the Buffet approach as I get older. Hard to argue with his results. Good companies, well managed, in places with a semblance of the rule of law on your side. Then, wait.

Berkshire has $65b of cash and cash equivalents.

[Benny Profane]

Out of what number as total assets?