| Author |
Message
|
| wallace6 |
 Posted: Mon Mar 07, 2005 11:42 am Post subject: Dollar Cost Averaging |
 |
|
Investing Sr. Associate
|
| You can do dollar cost averaging where you can put in as little as $100/month each month into a stock or mutual fund. |
|
| Back to top |
|
 |
| Benjamin |
| Posted: Mon Mar 07, 2005 12:14 pm Post subject: |
|
|
Administrator
|
| Dollar cost averaging? How does this work? |
|
| Back to top |
|
|
| InvestingMac |
| Posted: Mon Mar 07, 2005 4:17 pm Post subject: |
|
|
Investing Manager
|
| eInvesting Admin wrote: | | Dollar cost averaging? How does this work? |
Essentially you invest in a stock in smaller portions and build your position over the long term. If the stock declines rapidly, you won't be hit as hard because you purchased the stock at a number of different price intervals. You also put yourself in a stronger position to break even if the stock turns around. It helps reduce risk.
The opposite of this would be to invest in a lump sum at one time.
Great tip, butit may be better suited for the low-risk investing section? |
|
| Back to top |
|
|
| fladoozle84 |
| Posted: Sat Mar 12, 2005 6:55 pm Post subject: |
|
|
Investing Sr. Associate
|
| What would be the minimum you could add a month? with what to start with? Does it depend on the original share price or the current price? |
|
| Back to top |
|
|
| thrilla |
| Posted: Sun Mar 13, 2005 6:54 am Post subject: |
|
|
Investing Sr. Associate
|
| fladoozle84 wrote: | | What would be the minimum you could add a month? with what to start with? Does it depend on the original share price or the current price? |
This is up to you. If you use a broker, then you will have to invest at least in a whole share each time you make a purchase. If you use a DRIP or an ESOP, then you have the option of making fractional purchases (however, most have a minimum purchase amount).
It doesn't even have to be monthly. You could do this on an weekly, bi-monthly, semi-annual, or even annual basis. |
|
| Back to top |
|
|
| InvestingMac |
| Posted: Sun Mar 13, 2005 11:37 am Post subject: |
|
|
Investing Manager
|
| fladoozle84 wrote: | | What would be the minimum you could add a month? with what to start with? Does it depend on the original share price or the current price? |
As thrilla said it is really up to you and the method of investing. As long as you build your position in small steps rather than a lump sum you are practicing dollar cost averaging. |
|
| Back to top |
|
|
| noksagt |
| Posted: Mon Mar 14, 2005 10:28 pm Post subject: |
|
|
Member of the Month! March
|
| DCA protects you from down periods & is good if you just set aside a percentage of your paycheck for investment, but I really think the value is overstated. If you have a lumpsum to invest & you intend to buy & hold, you are usually better off dropping it all in at once--lower brokerage fees & more time in the market usually means bigger returns. |
|
| Back to top |
|
|
| raven3517 |
| Posted: Tue Mar 15, 2005 3:32 am Post subject: |
|
|
Investing Associate
|
This thread has been helpful, just wanted to say thanks for those who contributed to it  |
|
| Back to top |
|
|
| wallace6 |
| Posted: Mon Mar 21, 2005 12:37 pm Post subject: It averages out great. |
|
|
Investing Sr. Associate
|
| With dollar cost averaging it "averages out" great. If the stock is down that month you buy more shares. If it is up it is less shares. I think it is a very good way to add to a retirement fund. |
|
| Back to top |
|
|
| noksagt |
| Posted: Tue Mar 22, 2005 5:01 am Post subject: Re: It averages out great. |
|
|
Member of the Month! March
|
|
| Back to top |
|
|
|
|
 |
| wallace6 |
| Posted: Tue Mar 22, 2005 6:11 pm Post subject: Not "bunk" |
|
|
Investing Sr. Associate
|
We have used dollar cost averaging for quite awhile now and has been very profitable for us. No investment in the market is guaranteed to be profitable.
With dollar cost averaging you still need to choose a good company or mutal fund. |
|
| Back to top |
|
|
| wallace6 |
| Posted: Tue Mar 22, 2005 6:17 pm Post subject: DCA |
|
|
Investing Sr. Associate
|
| I think Investopedia puts it guite nicely "Dollar cost averaging lessens the risk of investing a large amount in a single investment at the wrong time." Not only do you have the ability to put money in on a systematic basis in small amounts according to your individual budget, but you also avoid the rist of investing all your "eggs in the wrong basket"! |
|
| Back to top |
|
|
| thrilla |
| Posted: Tue Mar 22, 2005 6:18 pm Post subject: Re: Not "bunk" |
|
|
Investing Sr. Associate
|
| wallace6 wrote: | We have used dollar cost averaging for quite awhile now and has been very profitable for us. No investment in the market is guaranteed to be profitable.
With dollar cost averaging you still need to choose a good company or mutal fund. |
I think what noksagt and the author of this article is trying to say is that dollar cost averaging is pretty much the same as (or at least not better than) investing in regular intervals. Dollar cost averaging is a conscious decision to buy more stock when the price of stocks drop. This is in contrast to investing in regular intervals at set amounts. |
|
| Back to top |
|
|
| InvestingMac |
| Posted: Tue Mar 22, 2005 8:01 pm Post subject: Re: It averages out great. |
|
|
Investing Manager
|
Great article!
You learn something new everyday. |
|
| Back to top |
|
|
| noksagt |
| Posted: Wed Mar 23, 2005 6:52 am Post subject: Re: DCA |
|
|
Member of the Month! March
|
| wallace6 wrote: | | "Dollar cost averaging lessens the risk of investing a large amount in a single investment at the wrong time." ....you also avoid the rist of investing all your "eggs in the wrong basket"! | But your expected return decreases if you DCA. That means the lower risk probably isn't worth it. Over the long run, the market increases more than it decreases. This means that your best returns will be when you put the money into it as soon as possible. It also means that, on average, DCAing will return less than lump summing as you have available. As the article points out, even if you put your money in the day before a crash, your returns would be better than any money market or savings account.
People should be investing regularly--because they get excess income regularly. But it makes no sense to let ALL of your assets sit in a savings account because of your DCA schedule. |
|
| Back to top |
|
|
|
|
stock market game on the web. At eInvesting you compete for monthly cash prizes while you interact, make virtual dollars, purchase items, and trade in the realistic stock market simulator. We make investing FUN!
