UnThreaded | Threaded | Whole Thread (23) | Ignore Thread Prev | Next
Author: going2win Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Roth IRA deposits Date: 11/13/2003 5:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Could you explain why this is? I don't believe in DCA. I invest all my savings whenever I have money. How would I do things differently with DCA?

Thanks,

Nick


Dollar cost averaging is a powerful mechanism to invest on a regular basis, as you do with your weekly salary.

It has the neat property that an investment can actually grow even if the stock price at the end is equal to the stock price at the beginning.

Consider this stock price history on a monthly basis:

Jan - 10, Feb - 9, Mar - 8, Apr - 7, May - 8, Jun - 9, Jul - 10

Assume you invest $100 each month so that the number of shares you buy each month is:

Jan - 100/10 = 10; Feb - 100/9 ~ 11; Mar - 100/8 ~ 13; Apr - 100/7 ~ 14

May - 100/8 ~ 13; Jun - 100/9 ~ 11; Jul - 100/10 = 10

Total Invested = 7x100 = $700
Total Number of shares = 10+11+13+14+13+11+10 = 82
Stock price at end = 10
Investment worth at end = 10x82 = $820
Profit = $120

Neat, huh ?

g2w


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (23) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Berkshire Hathaway

Reestablishing the Middle Class
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement