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Investing/Strategies / Pseudo Drip
|Subject: Re: Quarterly Pseudo Driping Bad?||Date: 11/8/2001 11:44 PM|
|Author: madmarv||Number: 239 of 244|
As you can see, not a great deal of commission cost for both plans, but which will be more beneficial for my overall return? Driping more frequenly, or less?
Statistically, the answer is neither. There is no significant benefit either way in the long term. The 0.7% savings in commissions is more than offset by the variation in average purchase price. George's article missed the point of dollar cost averaging. He didn't figure out the average purchase price would be under the various scenarios. The bottom line is that monthly or quarterly dripping plans will probably end up with an average price within a couple percentage points of each other and there is no guarantee that a greater frequency will mean a lower purchase price.
Here's a post I made a while back on the subject. I should mention that this study used a long purchase period (5 years). Don't expect the results to be the same for shorter periods.
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