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I’d sprinkle in some doge coin and then keep some bills under your bed to ensure maximum diversification
OP, Low cost index funds are probably the best way to do it, especially if you don’t want to think about it for few years. Look at Emerging Markets Index funds as well since returns are likely going to be higher in the long term ( if you are not worried about short term volatility)
Do whatever PWC2 says, ignore others 😏
Don’t abuse diversification. S&P 500 is already diversified - you own 500 stocks, how much more you want
I would just add this advise: when you are closer to retirement ( i.e. when you want to use money) start watching your investment returns closely for few years. When returns are decent/good ( e.g. like last year) move money out of index funds to fixed income (e.g. bonds)
Bcg : Did you just quote Reddit as a source for investment advice?
Did you just recommend dumping money in one go, instead of dollar cost averaging?
I am a bit overwhelmed with your gems of wisdom. Why did I not think of this earlier, damn.
Thanks all
Look up the bogleheads three fund portfolio. Also read up on reddit about investment timing - most recommend dumping it all in at one time vs dollar cost averaging
https://investor.vanguard.com/investing/online-trading/invest-lump-sum
Mr. wise associate, if you’re calling the top please let all of us plebs here at fishbowl know
OK this is a link from an investment company. Have you heard the adage - ‘never ask a barber if you need an haircut’ .
What works better for vanguard to get 100 k in one go or over 2 years? They mention something about their research, which is just a lip service. No link to the research methodology or results.
Besides logic of DCA is not higher return but less risky returns. Vanguard has very skillfully inserted that in last few lines.
I’d be delighted if you posted a link to your historical study of DCA vs lump sum investing, but I have a hunch that you are just an opinionated and risk averse person.
Oh looks like I ruffled some feathers. But nevertheless I will call out your BS
You need to read some real finance literature. What you are asking for is an oxymoron - historical proof of DCA cannot exist. DCA is suppose to minimize risk for an individual investor at a given point in time. There is no history, each investment will take its own route - sometimes DCA will be the winner other times one time will win. What DCA allows an investor to do is to reduce volatility irrespective of the direction market takes.
Now to cheer you up - there is some merit in the argument that vanguard makes. I have read the report they refer to. But as I said that merit is purely academic and is actually dangerous for an investor. Their argument is centered on the fact that market historically goes up 60% of the time. Which empirically is true, but how does OP know if he is in 60% territory or 40. It encourages you to time the market, which is not good for an average investor.
The real benefit of DCA is based on behavioral economics. It discourages market timing and allows for a more disciplined investing. Imagine if OP was to take you seriously and decided to go into market at one go but develops cold feet thinking market is too high- he waits for 6 months, which turns into one year and looses out on market participation.
I toyed with the idea of sharing a link, but in order to not disappoint you here is one
http://news.morningstar.com/articlenet/article.aspx?id=584313
But if you really want to learn the core of DCA (& investing in genera) then read Intelligent investor and security analysis by Graham. Chap 20 of intelligent investor will answer some of your DCA questions
Phew my hand hurt
Great post A1. I think DCA is another form of diversification of risk (i.e. risk of market going down over the investment period). Like any diversification strategy, it lowers both risk and rewards. The argument against DCA is the same argument against diversification. If you are okay with slightly lower returns that comes due to you lowering “market timing” risk, DCA is the right strategy. If not, hold the nose and take the plunge like BCG1 says - knowing that the “odds” are with you :)
Yup thanks
You are quite right in comparing DCA with diversification, never thought of it this way. It’s a great analogy.
But there is one difference - diversification, if you go by modern portfolio theory can actually increase returns. A portfolio can theoretically beat ( on risk adjusted basis) all underlying individual securities. DCA doesn’t make that claim.
However I don’t believe in modern portfolio theory, it’s place is in textbooks - so your analogy is quite apt.
Now waiting for BCG to throw a link to prove me wrong or play Sherlock and guess more of my personality traits 👍
Enjoy your lifetime of below average returns
BCG1, above average returns comes from taking above average risk. The basic rules in finance are like the laws of gravity - very hard to escape (as long as you are on this planet.) I would rephrase to say: enjoy lifetime of “risk optimized returns” 🙂
BCG: Enjoy life of above average cockiness and below average intellect.