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We've just begun investing, after having read mountains of stuff (the Fool stuff at the top, of course :-), and now we're even more confused.

Could someone please help with the following questions:

1. We heard that it's best to "dollar cost average" into the market. How does one do this, if investing in the Foolish Four, if the four stocks chosen at any one time are variable. (Theoretically we could end up owning the entire Dow at some point...)

2. Not to be funny, but how do we know when to sell? We're investing for the long term, and don't know whether we should set a target when we buy (and sell no matter how quickly the target is reached), or whether the stock should be allowed to ride for a period of time before even considering selling.

Help!

We're helping our 17-yr old learn the way of the Fools, but we're obviously not very Foolish ourselves...yet.

Thanks.
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Could someone please help with the following questions:
1. We heard that it's best to "dollar cost average" into the market. How does one do this, if investing in the Foolish Four, if the four stocks chosen at any one time are variable. (Theoretically we could end up owning the entire Dow at some point...)
2. Not to be funny, but how do we know when to sell? We're investing for the long term, and don't know whether we should set a target when we buy (and sell no matter how quickly the target is reached), or whether the stock should be allowed to ride for a period of time before even considering selling.


It is not recommended to do dollar cost averaging in the Fool Four (FF). The start amount should be about $4K divided equally among the 4. Any additional cash should be set aside in a money market fund or deposited to your brokerage account until you rebalance and then it is invested in your new FF. If you have enought new cash you could open up a new portfolio every time you reach $4K. FWIW, I have 4.
I'll go out on a limb here, you could never end up owning the entire Dow at some point because it would take 8 portfolios to do so and if there is one stock that doesn't pay a dividend, it would never be selected. Plus there is not a significant enough movement in the stocks to have such a thing happen.

Now your second question puzzles me a little. In your 1st question you're investing in the FF which is a mechanical investment method and will tell you what and when to sell; you buy the 4 current stocks for the day you invest; hold for a year + a day; rebalance by selling any stocks that are not the current stocks for the rebalance date and buy the new current stocks. If you have stocks outside the FF, you could sell when it reaches a target gain or loss (say +30% and -10%); or when you find a stock which you think is better and sell one of your current holdings for cash to buy it.

I would suggest get a better understanding of investing, in general, and the FF, in particular. Here's some reading that should help:
Investing basics -
http://www.fool.com/School/Basics/InvestingBasics.htm
Dow stocks -
http://www.fool.com/school/dowinvesting/dowinvesting.htm
Fool's School -
http://www.fool.com/School/13Steps/13Steps.htm
Fool Four Explained
http://foolwest.fool.com/DDow/FoolishFourExplained.htm
RP explanation -
http://www.fool.com/DDow/1998/DDow980918.htm
current Dow order -
http://quote.fool.com/livecalc/livecalc.asp

It's best to post FF questions to the FF msg board here -
http://boards.fool.com/messages.asp?id=1030001000000000
and while you are there, read the FAQ's.


Respectfully,
SBtS

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The Foolish Four is a particular way to invest. Sailbad did an excellent job, as always, answering your questions from that perspective. However, I couldn't tell if you were asking just about the Foolish Four or investing in general. So, I thought I would answer based on general investing...

>>>
1. We heard that it's best to "dollar cost average" into the market. How does one do this, if investing in the Foolish Four, if the four stocks chosen at any one time are variable. (Theoretically we could end up owning the entire Dow at some point...)

<<<

In general, it is best to invest in one lump sum:

http://www.fool.com/fribble/1996/fribble960826.htm
http://www.fool.com/fribble/1997/fribble970410.htm
http://www.fool.com/fribble/1997/fribble970618.htm

Although when I was first starting I didn't have the cuts to do it ;-) Dollar cost averaging was the crutch I, and many others, needed to start and starting is more important than how you do it.

BTW, you should not dollar cost average the Foolish 4 as Sailbad said.

>>>
2. Not to be funny, but how do we know when to sell? We're investing for the long term, and don't know whether we should set a target when we buy (and sell no matter how quickly the target is reached), or whether the stock should be allowed to ride for a period of time before even considering selling.

<<<

Nobody knows when to sell, this is not an exact science. Here are some good articles on what our opinion is:

http://www.fool.com/CashKing/1998/CashKingPort980311.htm
http://www.fool.com/EveningNews/1997/EveningNews970403.htm [Scroll down for the article.]
http://www.fool.com/EveningNews/1997/EveningNews970404.htm [Scroll down for the article.]
http://www.fool.com/School/SellingStrategies.htm

Patrick
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