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Author: DrTarr Big red star, 1000 posts 10+ Year Anniversary! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: $-Cost Averaging/Time Diversification: Myths Date: 3/19/2012 9:58 PM
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Dollar Cost Averaging vs. Lump Sum investing is a myth, born to soothe the investing psyche of the uneducated (not derogatory) - Think of it this way. You are buying the stock because there is a postive expectation of an increase in value, and over time, the odds are in favor that there will be such an increase. Think about the number of years the average has gone up versus the average going down. And this is true for any set time period - more of those time periods result in up movements than in down movements. So, most of the time Dollar Cost Averaging is just that - A COST!

It is a good marketing tool, to ease some into stocks that are nervous, and as well a good tool to increase commissions!

Time diversification - in its purest meaning is also a myth. The random walk is just as random over long periods. If the diversification is on ending protfolio value, then the math shows equal risk HOWEVER, as mentioned, if as sometimes is referred, time diversification is just looking at the return of a stock over a time horizon, then a longer time horizon does give a better chance of an increase in value, but also a better chance that if there is a decrease it is a significant decrease. 5% up, 100% down!!

d(dollar COST averaging)/dT
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