Search found 442 matches

by Frengo
Tue Jun 25, 2013 11:06 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

If the DCA investor is indeed "one and only" then you must have fixed both the start date and the end date of the DCA investment. Let's say your time period is from the first trading day of January 1980 until the first trading day of January 2000 (pick two other dates if you prefer). The LS investo...
by Frengo
Tue Jun 25, 2013 10:51 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

I think there is no disputing that the lump sum is statistically superior if you could perform a series of tests (or even if there were such a thing as reincarnation). I also believe that lump sum is the best method for all investors (as a group). I have no doubt of this. We can perform a series of...
by Frengo
Tue Jun 25, 2013 10:04 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Man and wife.
by Frengo
Tue Jun 25, 2013 10:02 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

The only way, of course, would be to compare the actual returns of the LS investor over that one specific period with the actual returns of the DCA investor over the exact same specific period. And every time we look we get a different result. So what do we do to see which is better ? We take lots ...
by Frengo
Tue Jun 25, 2013 9:55 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Have you read Paul Marshall's study that demonstrates otherwise? Do you have any actual studies that contradict it or are you just full of it? There is no need to be impolite, it is not my fault if you feel lost. I'm trying to help. Using the word "study" in Marshall's study is quite a stretch. You...
by Frengo
Tue Jun 25, 2013 9:25 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

An LS investor invests the lump sum at the start of the investment period and sells it at the end of the investment period. So once you fix the period there is also only one possible LS result! And how would you know if he comes out ahead of the DCA investor ? You want to invest 95% in stocks now ?...
by Frengo
Tue Jun 25, 2013 9:16 pm
Forum: Personal Investments
Topic: first post, new to the site. College student seeking advice
Replies: 3
Views: 452

Re: first post, new to the site. College student seeking adv

If your tax rate is zero/near zero Roth is the way to go. You can alway pull out the money later if you change your mind.
by Frengo
Tue Jun 25, 2013 9:06 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Why on earth could I only contribute $5? If you let it get to the point where your at-risk assets represented 98+% of your total assets than you have overextended yourself. Are you saying because it is an IRA account (a word that didn't occur in your post and you seem to be adding in now because yo...
by Frengo
Tue Jun 25, 2013 9:01 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

Actually, I was thinking of comparing one particular LS investor to the worst DCA investor. There is only one DCA investor. And using LS, in addition to being very likely outperform the average DCA investor, almost completely guarantees outperforming the worst DCA investor. Once you fix the period,...
by Frengo
Tue Jun 25, 2013 8:52 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Huh? If I only have $5,000 out of my equity portfolio in 20 years I will definitely have missed the mark - a 98% equity allocation is definitely riskier than I am comfortable with then That's why I wrote you have 300k in your portfolio (where does $5,000 come from ?). Don't know the exact portfolio...
by Frengo
Tue Jun 25, 2013 8:44 pm
Forum: Personal Investments
Topic: Thoughts on lump sum investing?
Replies: 70
Views: 4191

Re: Thoughts on lump sum investing?

Ketawa wrote: Don't confuse strategy with outcome.
Yeah, the strategy is an initial DCA and the outcome is the impossibility of finding yourself in Default User BR's shoes.
by Frengo
Tue Jun 25, 2013 8:40 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

If you compare a DCA from January 1980 until January 1982 with all the LS investors in that period, then you are comparing DCA at one start point (January 1980) with 2 years worth of LS start points. Indeed I am Comparing one measurement of DCA results with the worst of a set of LS measurements cer...
by Frengo
Tue Jun 25, 2013 8:14 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

You are comparing one fixed DCA start point with the worst LS start point within the following 2 years. No. I'm comparing a DCA over a 2-year stretch with all the LS investors who started in the same 2 years. That's the reason why I'm guaranteed to outperform the worst of them, since we are using t...
by Frengo
Tue Jun 25, 2013 8:00 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

Things are going very badly for someone who was DCA-ing in over the past two years and just finished now. Yes, but not as badly as for those who LS-ed at the worst possible moment in those last two years. That's all DCA does. An if you are thinking that going 80% stocks + 20% cash would have improv...
by Frengo
Tue Jun 25, 2013 7:58 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

I would probably need to draw down my non-equity portfolio quite a bit before I would do that such that my total portfolio risk exceeded my tolerance. I'm probably not a great test case for it because my contribution growth has been plenty to keep up and compensate for dips in asset growth so I hav...
by Frengo
Tue Jun 25, 2013 7:54 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

If you felt you needed to be partially out of the market for (say) two years, the NEXT two years are just as risky as what you were afraid of to begin with. I don't feel like I want to be outside the market. I want to be 100% in stocks. When do I buy ? Today ? On september 14th ? How do I decide ? ...
by Frengo
Tue Jun 25, 2013 7:49 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

The answer to 2 is of course also yes, but I am glad that you at least admit that there is some other way to reduce volatility besides using DCA, without needing to be given a correlation estimate in advance. And using 80% stocks/20% cash over your entire investment period gives you a huge advantag...
by Frengo
Tue Jun 25, 2013 7:46 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

Wrong again... Allow me to remind you what DCA is: "DCA is not a method for outperforming the average LS investor. It is a method for eliminating the risk of performing as bad as the worst LS investor" Once my DCA ends, I'm locked for life with all the LS investors. What happens to them it happens ...
by Frengo
Tue Jun 25, 2013 7:39 pm
Forum: Personal Investments
Topic: Thoughts on lump sum investing?
Replies: 70
Views: 4191

Re: Thoughts on lump sum investing?

Default User BR wrote: I invested 100k lump-sum in the summer of 2007. Spare me your sad tale.
Wouldn't have been a happier tale had you split the dough in a dozen portions ?
by Frengo
Tue Jun 25, 2013 7:37 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Not at all, I rarely would change the target (I have been doing this for 6 years and haven't changed the target once). So in those six years your quarterly results have never changed a lot ? I find that hard to believe. And if they change a lot and you do not hange your allocation, then why are you...
by Frengo
Tue Jun 25, 2013 7:24 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

If you are knowledgeable about MPT, correlation, and AA, can you answer these questions based on your knowledge? 1) Is 80% stocks and 20% cash at least slightly less volatile than 100% stocks? 2) If there were some hypothetical asset (let's call it XYZ) that is perfectly positively correlated to st...
by Frengo
Tue Jun 25, 2013 7:23 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

avalpert wrote: Yes, 70% of the time the negative effect propagates till the end of the investment, 30% of the time the positive effect does...
The effect is avoiding the baddest 30% (or whichever share it turns out to be). Once you have avoided it it is avoided in perpetuity. Time flows in one direction only.
by Frengo
Tue Jun 25, 2013 7:22 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

avalpert wrote: Um, because debt holders have first right to assets over equity holders?
Nope! Most companies never go bankrupt.
Try to analyze how an investor profits from stocks and how he profits from bonds.
by Frengo
Tue Jun 25, 2013 7:20 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

If you have more gains from the past, then you have more to lose from a drop now. Suppose for instance that you are going to have 2 years of 50% losses and 18 years of 10% gains, and you start with $200,000 invested. If the losses occur at the start, you would lose $100,000 in the first year, then ...
by Frengo
Tue Jun 25, 2013 7:15 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

No assumptions about correlation are required to reduce risk by adding less risky assets. Even in the worst case where bonds turn out to be 100% positively correlated to stocks, as long as the magnitude of their price movements is less than stocks, moving stocks into bonds will reduce the overall p...
by Frengo
Tue Jun 25, 2013 7:12 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: One More Thing

umfundi wrote: DCA presumably protects against bad things in the first year.
It promises a less than bad outcome. Why am I not excited?
I don't know. Are you excited about your car's comprehensive insurance ?
Would you be more excited if you hit a pedestrian and you didn't have insurance ?
by Frengo
Tue Jun 25, 2013 7:09 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

If I am going to live in a house for 20 years, would you recommend that I buy fire insurance for the first 2 years, and then keep it uninsured for the next 18 years? Why or why not? The effect of the first two years of DCA carry over till the end. It isn't anything like discontinuing an insurance.
by Frengo
Tue Jun 25, 2013 7:07 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

Sure, if your goals (amount of risk desired) change, change your AA, but what has any of that got to do with DCA? The question was why does DCA suddenly stop matching your goals? Not why do your goals change. DCA does not have an instantaneous effect and when you stop it goes away. It has a cumulat...
by Frengo
Tue Jun 25, 2013 6:08 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

My time period happens to be quarterly, my trigger for adjusting my allocation happens to be =/-10% off the path for two consecutive periods. After 6 months you don't have a clue. Dispersion of quarterly market returns is simply huge. You are driving blind, reacting to noise. I accept that my estim...
by Frengo
Tue Jun 25, 2013 5:52 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

Clearly_Irrational wrote: The magnitude of the drops avoided vs. the magnitude of the gains lost is a critical piece to that calculation.
And when you buy insurance remember that it is the catastrophic result that you are trying to avoid. Adding one excellent result and one horrible one do not balance out.
by Frengo
Tue Jun 25, 2013 5:50 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

It's quite logical. Your planned DCA period is two years? For the optimum DCA result, invest nothing now, wait and then invest 100% in two years. There is zero risk of loss for that two year period. No dispersion either. And, a better result than any negative LS result. Not just better than the one...
by Frengo
Tue Jun 25, 2013 5:48 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

I think many of the posters against VA neglect the fact that even with DCA you still make assumptions about expected returns. Even with DCA, you have to make some assumptions about how much money you'll need when you retire and expected rate of return when you decide how much to contribute to your ...
by Frengo
Tue Jun 25, 2013 5:41 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

umfundi wrote: The logical limit of DCA is not to invest at all. Risk, dispersion equal zero.
I fail to see any logic in that.
by Frengo
Tue Jun 25, 2013 5:41 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

2wolves wrote: I bet there are also some scenarios where you wouldn't.
I bet he carries some form of insurance, even against much lower risks.
by Frengo
Tue Jun 25, 2013 5:40 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

Lump-sum wins 70% of the times! It means it loses 30% of the times. QED What should be the interesting part is the difference in magnitude of the losses in those 30% of cases vs. the difference in magnitude of the gains using the two systems. That will give you a cost vs. benefit. Yes, and you'll s...
by Frengo
Tue Jun 25, 2013 4:56 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

Oh hey, I should have known, Gummy already put together two nice simulators for all of this: http://gummy-stuff.org/DCA-SS.htm If you use the 2nd one you may want to update it with the last 12 years worth of monthly returns since that involved some nice crisis periods. Don't just take someone's wor...
by Frengo
Tue Jun 25, 2013 4:55 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

empb wrote:We should probably start a new thread to first clear up whether stocks are riskier than bonds. We can come back to this one later.
I'm not too sure you are able to say why one is riskier than the other....
by Frengo
Tue Jun 25, 2013 4:50 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

Your expected return is wrong on day 1, mmmh... I don't know. That assumes that market returns are an absolute truth up there with all the other Platonic forms. If you run out of cash on the sideline and are drifting below your path for more than one or two time periods it should tip most people of...
by Frengo
Tue Jun 25, 2013 4:29 pm
Forum: Personal Consumer Issues
Topic: Free labor as part of an interview?
Replies: 7
Views: 1352

Re: Free labor as part of an interview?

They've gotta pay.
The worker has to be covered under state laws, even if it is employed for only 4 hours.
by Frengo
Tue Jun 25, 2013 4:27 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

Clearly_Irrational wrote: Taxes, transaction costs and lower expected returns.
Clearly rational.
by Frengo
Tue Jun 25, 2013 4:26 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

No, it isn't. This completely misses the very basic fundamental of risk in your portfolio. Asset allocation reduces your risk by putting a portion of your investments in less risky assets - that the return isn't equal to the average of the two asset returns is a result of less than perfect correlat...
by Frengo
Tue Jun 25, 2013 4:21 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

First, no you won't find out ex-post you fill find out while you are still in the accumulation stage as indicated by being off the value path. How long does it take for you to understand that your expected return is wrong, as opposed to the market returns being in their usual oscillation mode ? Sec...
by Frengo
Tue Jun 25, 2013 4:07 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

First, no you won't find out ex-post you fill find out while you are still in the accumulation stage as indicated by being off the value path. Second, exactly what system are you using to know you set you aim to high ex-ante? It is an excellent characteristic. It provides an indicator that your exp...
by Frengo
Tue Jun 25, 2013 4:01 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

The Wizard wrote: I didn't mean plain old DCA; I meant DCA enhanced by Valuation and Sentiment criteria,
I'm sorry, I don't know what those are and I'm also quite old-fashioned.
by Frengo
Tue Jun 25, 2013 3:59 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

This makes no sense. A 5% hit over one year is OK? The same over two years is maybe OK? The same over three or more years is not OK? If your investing horizon is twenty years, you can of course choose to take that 5% potential hit in any one year. How do you choose that? Why must it be the first? W...
by Frengo
Tue Jun 25, 2013 3:52 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

It's not an alien concept, it just doesn't make sense. The risk reduction would be much more effectively achieved by holding a less risky portfolio at all times, not just over an arbitrary DCA campaign. Would it ? That other technique for risk reduction is based on the correlation, or lack of there...
by Frengo
Tue Jun 25, 2013 3:47 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

And, money in the market must be there for at least 20 years. So, I have a 20 year horizon, and invest the money I have now. Ten years later I have an inheritance. I cannot invest that, for my horizon is now only ten years. But my previous existing investments are OK to remain invested, I think bec...
by Frengo
Tue Jun 25, 2013 3:42 pm
Forum: Personal Investments
Topic: Value Averaging and Roth IRA
Replies: 38
Views: 2288

Re: Value Averaging and Roth IRA

If your risky investments decline to the point where you don't have enough cash to get back on your value path you have just been provided very valuable information - your goal is too high. You either need to adjust your goal, increase the risk in your investment (to attempt to increase returns) or...
by Frengo
Tue Jun 25, 2013 3:38 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCA

empb wrote: Which is exactly what logic requires.
You didn't understand my answer. It was an extremely simple answer.
by Frengo
Tue Jun 25, 2013 3:36 pm
Forum: Investing - Theory, News & General
Topic: Lumpsum investing versus DCA
Replies: 194
Views: 8689

Re: Lumpsum investing versus DCF

Here's the key point: if it's worth doing with NEW money, then it's worth doing with OLD money (already in the market). Hence one must connive a scheme that allows, even ENCOURAGES, repetition... Here's the answer and it is the same answer as in the previous posts: The reduction of risk through DCA...