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Arindam,

[N]ever mind the tiny little fact that getting back to even as much as 20 years later doesn't factor in the erosive effects of inflation.

A bit of hyperbole?

Even if you BEGAN a DCA schedule into the S&P 500 at the worst possible date imaginable (7/1/2007, at the bull market peak prior to the crash), you were back to even in 2010. $100 invested monthly from 7/2/2007 to 1/4/2010 would have produced an ETF port worth $3142.57 with cumulative investment of $3100.00 over those 31 months. That's a little bit shorter than 20 years. And of course, if you continued the strategy through the subsequent bull market you would have done quite well.

That $7300 investment through 2010 would be worth a little under $15,000 today with not a dime contributed after 1/2010. The bull run would substantially improve those returns.

There are only two ways to make money in markets as a long: 'buy low and sell high' and 'buy high and sell higher'.

This is true. This is the only way to beat the market. But beating the market, armed with limited knowledge and capital is not very likely for Dianne, is it? In the absence of actual experience and the time to spend on getting that specialized knowledge I'll side with Buffett and pick the market tracker.

How much experience can be gained from once a month buying? Not enough, fast enough, to matter. Diane needs to be doing turnover, a lot of it, so she gains a sense of how markets work. That means making lots of small, commish-free bets, which isn't even one-third of what investing requires but what everyone want to focus on, the buying. There's also the selling, plus the god awful amount of back-office work that needs to be done.

No experience can be gained from mechanical once a month buying. But she can't realistically gain that experience with the sum that she has. The frictional costs of any transaction would erode $1000 in a matter of a dozen trades. So what's her alternative? Do nothing? Or trade it away to nothing?

It's best to save it, while putting it to work in a conservative manner. The simple task of at least following the market and seeing how exciting and harrowing it can be affords some experience. And she can go about reading and further educating herself, moving eventually to a more sophisticated and potentially more lucrative strategy in the future. DCA provides a mechanism to reinforce the importance of monthly saving, while simultaneously providing an incentive to watch the market more closely and learn at least some of the ropes.

But here's the grim reality. Likely, she's got a day job, plus a commute, plus a family life. So her time to learn the investing/trading game is even more limited than her funds. So, at best, she's a weekend warrior with 4 hours/week max to do her research and set up her orders, and the current market is toppy, and the economy is fragile, if not down right fraudulent, and not a good time to be deploying new money.

I agree that this is a dangerous time to be buying. But what is she really asking?

I suppose we need to know more about her. Is she 21 at the start of a long life with loads of future income? If so, she should get started while doing some learning. But if she's 65, short on capital and just anxious to climb on board a hot 2017 market, she should probably stay away from this market. If it's the first, dollar cost averaging in, preferably to her 401k or IRA is a pretty solid start for a newbie. You are free to assert otherwise with no evidence of your own as much as you like.

Peter
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