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Author: Hillmp Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75378  
Subject: Beating the Dow w/Payroll Deductions Date: 2/11/1998 7:28 PM
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First, I've received interesting responses to the first couple of messages I posted in this folder, so thanks for the responses.

Now to the heart of the matter---I've narrowed my choice of investments for my 403(b)(7) retirement account (which only allows mutual funds) to two: an S&P 500 Index and a Dow 10 fund.

The Dow 10 accepts contributions on a rolling basis and every 10 weeks or so recalculates the 10 stocks. Example: Every two weeks for Jan-Mar 15th, my payroll deductions buy the 10 stocks as calculated on Jan1. These buys are grouped as Purchase #1. Then, between Mar16 and May31, my payroll deductions buy the 10 stocks as calculated on Mar16. These buys are grouped as Purchase #2. And so on throughout the year. Next year Purchase #1 plus payroll deductions for Jan1/99-March15/99 all buy the same 10 stocks. And so on for Purchases #2-5.

Do the advantages of this strategy i.e. being invested in a historically higher returning strategy (17% v 11%) outweigh the fact that I'm buying stocks at varying prices (the fluctuations within a given 10 week period) and therefore not following a true Dow 10 strategy.

My other thought is to invest the current year's payroll deductions in the S&P 500 index fund and then once a year on a given anniversary date, put that money into the Dow 10 fund.

Comments?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1749 of 75378
Subject: Re: Beating the Dow w/Payroll Deductions Date: 2/12/1998 6:45 PM
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Hillmp,

<<Now to the heart of the matter---I've narrowed my choice of investments for my 403(b)(7) retirement account (which only allows mutual funds) to two: an S&P 500 Index and a Dow 10 fund.

The Dow 10 accepts contributions on a rolling basis and every 10 weeks or so recalculates the 10 stocks. Example: Every two weeks for Jan-Mar 15th, my payroll deductions buy the 10 stocks as calculated on Jan1. These buys are grouped as Purchase #1. Then, between Mar16 and May31, my payroll deductions buy the 10 stocks as calculated on Mar16. These buys are grouped as Purchase #2. And so on throughout the year. Next year Purchase #1 plus payroll deductions for Jan1/99-March15/99 all buy the same 10 stocks. And so on for Purchases #2-5.

Do the advantages of this strategy i.e. being invested in a historically higher returning strategy (17% v 11%) outweigh the fact that I'm buying stocks at varying prices (the fluctuations within a given 10 week period) and therefore not following a true Dow 10 strategy.

My other thought is to invest the current year's payroll deductions in the S&P 500 index fund and then once a year on a given anniversary date, put that money into the Dow 10 fund.>>

The Dow strategies are based on annual trading date. In the fund purchase you describe, you won't really have that. You'll end up with four distinct portfolios, none of which are exclusively composed of stocks bought at the prices in effect on the anniversary dates of those portfolios because of the uneven cash flows. In such a situation, I for one would prefer to go the alternative route, i.e., collect a year's worth of contributions within the index fund and move that sum once annually into the Dow 10 fund.

Regards…..Pixy


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