Have any of you dollar cost averaged in over 5 years
Have any of you dollar cost averaged in over 5 years
I feel the market is high and thought of this idea what do you think of it? And have any of you ever done a multi year dollar cost average in?
Re: Have any of you dollar cost averaged in over 5 years
Presumably you mean from a big pile of money that you already have and not from your paycheck via 401(k) or 403(b).
If so, my answer is No. I have done DCA over the course of about 10 months.
If so, my answer is No. I have done DCA over the course of about 10 months.
Re: Have any of you dollar cost averaged in over 5 years
Right livesoft. I thought a 5 year dollar cost averaging would reduce risk.
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Re: Have any of you dollar cost averaged in over 5 years
Not on purpose.
401k/403b contributions are DCA, but only because they have to be. ROTH is done in January all in one chunk. Taxable investing is done in a few chunks throughout the year as I see where we are as far as unexpected expenses.
The only chance I had to make that sort of choice was with ~$50k from a insurance settlement, and it went right in according to my AA.
401k/403b contributions are DCA, but only because they have to be. ROTH is done in January all in one chunk. Taxable investing is done in a few chunks throughout the year as I see where we are as far as unexpected expenses.
The only chance I had to make that sort of choice was with ~$50k from a insurance settlement, and it went right in according to my AA.
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Re: Have any of you dollar cost averaged in over 5 years
Five years seems like a long time to wait to get to your desired asset allocation.rec7 wrote:Right livesoft. I thought a 5 year dollar cost averaging would reduce risk.
Re: Have any of you dollar cost averaged in over 5 years
Yes, but one wants to take on risk. Otherwise, why bother to invest?rec7 wrote:Right livesoft. I thought a 5 year dollar cost averaging would reduce risk.
Re: Have any of you dollar cost averaged in over 5 years
No. Longest was 18 months at $ 1000.00 per month after initial minimum of $3000.00. You will miss a lot of upside. Remember 2 out of 3 years market goes up. Use that your advantage.
Re: Have any of you dollar cost averaged in over 5 years
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Last edited by mwm158 on Thu Jan 08, 2015 1:52 pm, edited 1 time in total.
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Re: Have any of you dollar cost averaged in over 5 years
I had $10,000 to invest in 2002, which was a lot of money to me at the time. The market was coming back after the Enron/accounting scandel so I figured it was a good time to invest it all, no DCA. Right after I bought into the market (all stocks) the double dip hit and my $10,000 was $6,900 in no time. In that case I would have been better off DCA, but those are the breaks. If I had $10,000 to invest today I'd go all in, no DCA. The odds are still in your favor to get it in as early as possible, I think. Nothing ventured nothing gained. If I had the money to max out my IRA in January I'd do it every year. I don't...so I DCA over the year but just because I have to.
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Re: Have any of you dollar cost averaged in over 5 years
I'm dollar cost averaging the proceeds of a home sale into BONDS, so I'm going verrry slowly.
Re: Have any of you dollar cost averaged in over 5 years
After the sale of a condo I was going to DCA the proceeds over a 3 month period. After 3 weeks I had invested everything. I could never last 5 years.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
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Re: Have any of you dollar cost averaged in over 5 years
I'd dollar cost average more than I do if my cash flow was better. As it stands, I have an auto invest set up with my Vanguard STAR account but have put it on hold for a few weeks to have cash flow for other things. I do end up contributing the full amount possible every year to my Roth IRA, usually doing a balloon contribution in March. I'll probably put an order in at Vanguard tomorrow for my initial 2014 contribution.
As a strict discipline thing, I do not DCA continuously. My cash flow gets too strained sometimes. I already have my 401K taking out a certain percentage each paycheck. Guess if I did not contribute there I could do my Roth on an uninterrupted DCA. I am lucky. My 401K plan allows me to contribute up to 80% of my paycheck for any pay period, up to the annual limit. So, if I wanted, I could put the 401K contributions on a simmer mode, just contributing enough for the match, and have freed up cash for the Roth IRA and once the Roth was maxxed out, I could up the 401K to 80% deduction if I wanted to partially catch up with the periods where I was just contributing the minimum.
As a strict discipline thing, I do not DCA continuously. My cash flow gets too strained sometimes. I already have my 401K taking out a certain percentage each paycheck. Guess if I did not contribute there I could do my Roth on an uninterrupted DCA. I am lucky. My 401K plan allows me to contribute up to 80% of my paycheck for any pay period, up to the annual limit. So, if I wanted, I could put the 401K contributions on a simmer mode, just contributing enough for the match, and have freed up cash for the Roth IRA and once the Roth was maxxed out, I could up the 401K to 80% deduction if I wanted to partially catch up with the periods where I was just contributing the minimum.
Re: Have any of you dollar cost averaged in over 5 years
I dollar cost averaged from 1982-2011
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: Have any of you dollar cost averaged in over 5 years
Why, specifically, in your personal circumstances, are you asking this question.rec7 wrote:I feel the market is high and thought of this idea what do you think of it? And have any of you ever done a multi year dollar cost average in?
Re: Have any of you dollar cost averaged in over 5 years
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Last edited by mwm158 on Thu Jan 08, 2015 1:53 pm, edited 1 time in total.
Re: Have any of you dollar cost averaged in over 5 years
I sold a home in July 2007, and wanted to get that money into tax-advantaged space. I put it in a money market account. We took about 70,000 out of our paychecks (457 and 403b) over each of the next two years, and lived off (in part) the home sale money, since our salaries were intentionally devastated. That worked out well, but it was only for peace of mind that I did it that way. It was irrational. It worked to a faretheewell, but was not what the research indicates one should do. The AA (not counting the cash) was to be 70/30 at that time, and it got there after 18 months or so.
Rather be lucky than good, as they say.
kdm
Rather be lucky than good, as they say.
kdm
Re: Have any of you dollar cost averaged in over 5 years
To me, risk means being somewhere other than my desired allocation. DCA increases this risk, and the longer we spread out the DCA, the more risk we're taking on.
Re: Have any of you dollar cost averaged in over 5 years
One intellectual basis for a particular kind of DCA is found in Michael Edelson's book, Value Averaging. foreward in the current edition by Bill Bernstein.
kdm
http://www.amazon.com/Value-Averaging-S ... +averaging
kdm
http://www.amazon.com/Value-Averaging-S ... +averaging
Re: Have any of you dollar cost averaged in over 5 years
You are correct! The market is high! In fact it is at an all-time high and the DJIA has seen 52 all-time highs this past year.rec7 wrote:I feel the market is high and thought of this idea what do you think of it? And have any of you ever done a multi year dollar cost average in?
Coincidentally, I published the data for a 10-year DCA the other day:
http://www.bogleheads.org/forum/viewtop ... 1#p1903041
The data is there, you could make a spreadsheet for a 5-year DCA for yourself.
Without rehashing a hundred other threads, the way to think of it is this:
DCA reduces risk because you have money that is not invested. If you want to reduce risk, don't invest. It's that simple.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Have any of you dollar cost averaged in over 5 years
It half-heartedly did the last two years with mixed results. So this year I have scheduled my investments in such a way that I hope to stick with it.
Although, I am keeping cash on the side in case the market loses its collective sense and discounts a bunch of the stocks on my wishlist.
Although, I am keeping cash on the side in case the market loses its collective sense and discounts a bunch of the stocks on my wishlist.
Re: Have any of you dollar cost averaged in over 5 years
Exactly. This is basically what everyone that invests does. Save and invest something from each paycheck. That's the way DCAing works for most people.Toons wrote:I dollar cost averaged from 1982-2011
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Re: Have any of you dollar cost averaged in over 5 years
I haven't. I opened my taxable last year and lump-summed $70k. I lump sum my Roth every January 1. When I get $5,000 or so in excess cash in the bank, I lump-sum it.
Re: Have any of you dollar cost averaged in over 5 years
+3555 wrote:Exactly. This is basically what everyone that invests does. Save and invest something from each paycheck. That's the way DCAing works for most people.Toons wrote:I dollar cost averaged from 1982-2011
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Have any of you dollar cost averaged in over 5 years
-4 Since that isn't DCA.555 wrote:Save and invest something from each paycheck. That's the way DCAing works for most people.
Re: Have any of you dollar cost averaged in over 5 years
+1placeholder wrote:-4 Since that isn't DCA.555 wrote:Save and invest something from each paycheck. That's the way DCAing works for most people.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Re: Have any of you dollar cost averaged in over 5 years
OP, do not despair. You have found another wuss and it is me. Exactly 2 years ago today I was 100% cash with my lifetime of savings. And I did not have the stomach, intestine or colon to lump sum it in or even DCA over a year or two. I began a quarterly DCA program into a 50/50 portfolio to be done in 20 equal pieces. Today, I placed my order which will be filled tonight for the 9th installment. And I missed out on a whole bunch of gains in stocks and have accrued a smaller amount of losses in my bond funds and have slept great every night. I indeed, when the 5 years is over, have to live with the allocation as detractors will point out that I have really just deferred the need to have a stomach. But I have 5 years total and 3 years left to adjust and it is working well for me. So if you need that to do it and otherwise wont, go ahead and enjoy.
Last edited by Calm Man on Fri Jan 03, 2014 6:15 pm, edited 1 time in total.
Re: Have any of you dollar cost averaged in over 5 years
Hmm...
Lump sum monthly vs DCA yearly -- which is better?
Lump sum monthly vs DCA yearly -- which is better?
Re: Have any of you dollar cost averaged in over 5 years
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Last edited by mwm158 on Thu Jan 08, 2015 1:53 pm, edited 1 time in total.
Re: Have any of you dollar cost averaged in over 5 years
Historically it is, yes. However so is paying off your 4% mortgage Vs. investing. Why do people still advocate it? Because mentally it might make you feel better. I think DCA for a large sum of $ over a 6-12 mo period is worth whatever $ you might miss out on, vs the feeling of being able to sleep at night (if you are that type of person).mwm158 wrote:People make bad decisions and bad investments all the time. There is no need to advocate for those poor decisions. Using DCA is absolutely the wrong decision, even if it seems like the easier one. DCA is a crutch for people bad at math and have no understanding about the investments they are about to make.
Re: Have any of you dollar cost averaged in over 5 years
I sold a house and had someone pay off a loan I had made in 2004; total roughly $475k. By the end of 2004, I had put 200k in BofA, 30k in a Countrywide CD, 20k at World Savings, 60k at my CU, 100k in Franklin Money Fund, and 65k at Vanguard. By the end of 2005, Vanguard had another 95k, Countrywide had another 275k, BofA had 200k less, the CU had 70k less, and Franklin had 35k less (there were 65k of earnings and savings). By the end of 2006, Vanguard had another 360k, Countrywide had 200k less, and Franklin and the rest had 70k less (earning and savings were 90k).
From September 2004 until the last purchase at Vanguard of 2006 in December was a period of 27 months to go from cash to cash and CDs to Vanguard and CDs (I still had 100k at Countrywide).
From September 2004 until the last purchase at Vanguard of 2006 in December was a period of 27 months to go from cash to cash and CDs to Vanguard and CDs (I still had 100k at Countrywide).
Re: Have any of you dollar cost averaged in over 5 years
You can figure that out for yourself. Get a list of stock prices. Suppose there are 12, for 12 consecutive months.surfstar wrote:Hmm...
Lump sum monthly vs DCA yearly -- which is better?
If you lump sum, you will pay the first price per share. If you DCA, monthly over the 12 months, you will pay the harmonic mean of the monthly prices. The Excel function is HARMEAN(list). You could look it up.
You also need to define "better". What are you trying to achieve? Higher returns? Lower risk? If the latter, you need to define "risk". Etc.
> rant
The arithmetic of DCA is very basic. It is incredible that so many think DCA is a "strategy". You can pay today's price, or you can pay the harmonic mean price over your DCA period. What's strategic about that? Just pick one.
< unrant
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Have any of you dollar cost averaged in over 5 years
I have been using DCA my whole life: from my salary.
Re: Have any of you dollar cost averaged in over 5 years
But that's not what he is doing. He is lump summing every month, not just once a year, and he is DCAing only once a year, not every month. [You have to see the for what it is]Leeraar wrote:You can figure that out for yourself. Get a list of stock prices. Suppose there are 12, for 12 consecutive months.surfstar wrote:Hmm...
Lump sum monthly vs DCA yearly -- which is better?
If you lump sum, you will pay the first price per share. If you DCA, monthly over the 12 months, you will pay the harmonic mean of the monthly prices.
Re: Have any of you dollar cost averaged in over 5 years
oops!sscritic wrote:But that's not what he is doing. He is lump summing every month, not just once a year, and he is DCAing only once a year, not every month. [You have to see the for what it is]Leeraar wrote:You can figure that out for yourself. Get a list of stock prices. Suppose there are 12, for 12 consecutive months.surfstar wrote:Hmm...
Lump sum monthly vs DCA yearly -- which is better?
If you lump sum, you will pay the first price per share. If you DCA, monthly over the 12 months, you will pay the harmonic mean of the monthly prices.
But, there is a school that says you should save cash and invest later?
My rant stands.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Have any of you dollar cost averaged in over 5 years
Exactly. That's the way to do it.wander wrote:I have been using DCA my whole life: from my salary.
I don't get this lumpsumming strategy at all. If you want to lumpsum, you have to stuff your savings into a mattress for a few decades, and then when you've finally got your lump saved up you have to get it all out of your mattress and stick it all into the market at once. Exceedingly silly strategy this lumpsumming.
Re: Have any of you dollar cost averaged in over 5 years
No,555 wrote:Exactly. That's the way to do it.wander wrote:I have been using DCA my whole life: from my salary.
I don't get this lumpsumming strategy at all. If you want to lumpsum, you have to stuff your savings into a mattress for a few decades, and then when you've finally got your lump saved up you have to get it all out of your mattress and stick it all into the market at once. Exceedingly silly strategy this lumpsumming.
The question is if you come into a bunch of money, what should you do?
For example, you fire your advisor and move $500,000 from Schwab to Vanguard. It was in DCA funds, so you are forced to liquidate and move to cash. Now, how do you invest that cash at Vanguard?
Or, your Aunt Nancy dies and leaves you $500,000 in cash. How do you invest it?
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Have any of you dollar cost averaged in over 5 years
Well...Um...I did. And I'm glad. I started legging into my AA in 2007, and I was glad I didn't go all in at market highs. 5 years seemed about right - legging in over a few months didn't seem likely to protect me from the kind of effect I was worried about, and as it turns out,it wouldn't have. Yes I took a painful ride down with those early investments, imagine how much more painful it would have been with a lump sum! Mind you, the lump came from dodging the 2000 crash - I never did get the re-entry point I was hoping for and after 5+ years from the bottom I decided on the DCA approach. It's an iffy track record to be sure - but it let me sleep at night.
Re: Have any of you dollar cost averaged in over 5 years
Yes, kind of. I sold two rental properties in 2005. I invested mainly in short-term bonds and CDs for awhile. As I learned more about asset allocation concepts (mostly through reading books by Larry Swedroe, William Bernstein, et al), I started investing more in stock index funds and investment-grade bond funds. I kind of followed the value averaging approach, that I had learned about from W. Bernstein's books. (Tip: before you do anything, read some good books on investing).
I was still at it when 2008 hit. Yikes! That was tough, but I kept at it, although I have to admit that I didn't dump as much into stocks as value averaging would have had me do. So maybe three to four years total until I settled into my target AA.
I like the way Ken French puts it. From a purely statistical point of view, you are more likely to do well with lump sum, since the stock market goes up about 2/3 of the time. However, from a behavioral perspective, if you get hit with a big down market after a lump sum investment, you might be scarred (and scared) enough to sour you on investing in the future.
A common suggestion is to put half into your target AA now, and DCA the rest in over some period of time. I prefer value averaging to dollar cost averaging, since it helps train you to add more to risky investments after they've done poorly (countering your fear), and not to add a lot to them after they've done well (countering your greed). Either way, this allows you to feel good if the market goes up, since you have half invested, and feel good if it goes down, since you get to buy more at lower prices. The tricky part is how long of a period to do the DCA or VA.
There will be a big down year at some point in the future. 10% corrections are not uncommon, and even 20% "bear markets" are not that uncommon. The thing is we don't know how much higher stocks will go before the next downturn. I'm sure many people were waiting for a 10% correction last year in US stocks, but we just didn't get it--instead we got a 30% increase with nothing more than a few percent pullback at any time (of course emerging markets were a different story).
We've had two big bear markets in the last 13 years, and averaging in through either of those would have been good. But we had a huge bull run during the 20 years prior to that, so you probably would have done better lump summing most of the time back then (although there were a few downturns, like the big one-day drop in 1987, which I remember well).
This gets discussed again and again here. Welcome to the forum. EDIT: sorry, I didn't see your number of posts. You have seen this discussed many times before, no?
Kevin
I was still at it when 2008 hit. Yikes! That was tough, but I kept at it, although I have to admit that I didn't dump as much into stocks as value averaging would have had me do. So maybe three to four years total until I settled into my target AA.
I like the way Ken French puts it. From a purely statistical point of view, you are more likely to do well with lump sum, since the stock market goes up about 2/3 of the time. However, from a behavioral perspective, if you get hit with a big down market after a lump sum investment, you might be scarred (and scared) enough to sour you on investing in the future.
A common suggestion is to put half into your target AA now, and DCA the rest in over some period of time. I prefer value averaging to dollar cost averaging, since it helps train you to add more to risky investments after they've done poorly (countering your fear), and not to add a lot to them after they've done well (countering your greed). Either way, this allows you to feel good if the market goes up, since you have half invested, and feel good if it goes down, since you get to buy more at lower prices. The tricky part is how long of a period to do the DCA or VA.
There will be a big down year at some point in the future. 10% corrections are not uncommon, and even 20% "bear markets" are not that uncommon. The thing is we don't know how much higher stocks will go before the next downturn. I'm sure many people were waiting for a 10% correction last year in US stocks, but we just didn't get it--instead we got a 30% increase with nothing more than a few percent pullback at any time (of course emerging markets were a different story).
We've had two big bear markets in the last 13 years, and averaging in through either of those would have been good. But we had a huge bull run during the 20 years prior to that, so you probably would have done better lump summing most of the time back then (although there were a few downturns, like the big one-day drop in 1987, which I remember well).
This gets discussed again and again here. Welcome to the forum. EDIT: sorry, I didn't see your number of posts. You have seen this discussed many times before, no?
Kevin
If I make a calculation error, #Cruncher probably will let me know.