Comments on: Does Dollar-cost-averaging work?

By: Does Dollar Cost Averaging Work? | Moolanomy

Does Dollar Cost Averaging Work? | Moolanomy — Mon, 03 Mar 2008 03:31:48 +0000

[...] Does Dollar-cost-averaging work?, Index Fund Fan [...]

By: indexfundfan

indexfundfan — Mon, 16 Oct 2006 12:42:29 +0000

Hi choozm,

Thanks for the link. I forgotten I had the other post too!

By: choozm

choozm — Mon, 16 Oct 2006 06:35:17 +0000

another indexfundfan’s post about DCA: “think risk reduction”

http://www.indextown.com/archives/2006/04/16

By: indexfundfan

indexfundfan — Mon, 16 Oct 2006 02:59:13 +0000

Hi samerwriter, I tend to agree some form of DCA is usually easier to accept. There is an article on Bill Bernstein's Efficient Frontier website that suggests a 6- to 12-month DCA; this has performed well based on historical returns: http://www.efficientfrontier.com/ef/997/dca.htm

By: samerwriter

samerwriter — Sun, 15 Oct 2006 18:18:16 +0000

Statistically, you can beat roulette in Vegas by betting on red or black and doubling your bet every time you lose.

But in reality, you have a very large chance of going bust. I imagine the same is true of lump-sum investing vs. DCA. (OK, lump-sum investing isn’t quite as disastrous as betting Martingale).

Yes, in aggregate clearly lump sum is better. But an individual needs to be concerned about ensuring a high probability of success (where “success” is defined by exceeding some threshhold, not attaining massive wealth).

The paper does address this briefly, but claims that the same benefit can be realized through prudent allocation. I view that as a copout. 99% of us aren’t capable of coming up with and maintaining an ideal allocation.