UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75801  
Subject: Re: when should I make my IRA contrib? Date: 3/11/2003 4:41 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
To clarify your quote, Bernstein found DCA to be a losing strategy vs lump sum investing. His words:

"I looked at the 523 rolling 6-month periods within the 44 years 1953-1996. Lump-summing came out only 1.11% better on average than DCA-6 (per use of DCA-6, not per year). DCA-6 came out better than lump-summing in 199 of the 523 cases. "

He goes on to say that this doesn't matter, since if you give up the lump sum upside, your investment will be less risky in the short term. Well, it matters to me. If I'm worried about equity risk, I'll diversify into other asset classes.

I like Bernstein, but this is a weak article. He's relying too heavily on historical patterns, poking around with the numbers until he finds a time period where DCA, while still inferior to lump summing, isn't *that* bad (he rejects 12 month and 36 month DCA). And he makes statements like:

"DCA is not for people who consider themselves competent market-timers...the DCA choice is for people who fear that the market may drop drastically at any time, but do not feel competent to judge whether that is more or less likely now than at some other time. "

So let me get this straight...DCA is for people that can't predict what the market will do, and yet who have a premonition the market is going to crash sometime in the next six months (his DCA timeframe). These investors have crystal balls, but they're a little cloudy, I guess.

I still don't buy DCA. I invest the max amount I can each month after paying my expenses.

Nick






Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
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.
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