(17-10-2013, 09:09 PM)ForeverAlone Wrote: [ -> ]do u guys believe in indexing + dollar cost averaging
like just put $$ monthly in an equity and a bond index?
Yes I think it works. Although I do not think most people have the discipline to buy and sell the same amount regardless of market sentiments.
That said, I do think that disciplined value investing would beat the market, especially for small investors. Due to the systematic problem with indexing (check out the Big Secrets for the Small Investors for more details).
For indexing long term, some knowledge of valuation would help you avoid bubbles such as the Japnese and the Internet bubbles.
Also most people do not invest once in their life time, and then sit back and watch their investment. A better performance guide for long-termed, buy and hold investing strategies would be a 5-10 years rolling average returns of indexing for the past 50 years.
To invest in both equity and bond at same time, this will mean that you will need to do balancing between the two, not just putting in money on a regular basis.
In normal circumstances, it should work. But it has shown that it does not work during the Global Financial Crisis.
You may want to read more about Permanent Portfolio in the link below.
http://earlyretirementextreme.com/wiki/i..._Portfolio
For me, I opt out Gold in my personal investment, replacing it with Property. And definitely not at 25% each as describe. Will it work for me? Time will tell.
i don't know much about monthly dollar cost averaging. i only know a lady who has been buying F & N all the way until retirement now. May be she has sold some or all or not at all. And she is just a Dickie or Mary.
But i believe in value cost averaging down or up. Pyramid up is better. You will always in the money as you pyramid up. Besides, the market is always on your side.
Alas! i have yet learn to pyramid up. i only did pyramid down. Which is not approved or favoured by professionals or financial books writer. In fact they say it's very dangerous to pyramid down. Who knows the stock's bottom or maybe bottom up.
Uncle Temperament,
Those who Pyramid Down on Blumont or any of it's associates will have a terrible time now...
(17-10-2013, 09:34 PM)NTL Wrote: [ -> ]Uncle Temperament,
Those who Pyramid Down on Blumont or any of it's associates will have a terrible time now...
Ya lol, exactly!
So try to be 99% sure your target is a BLUE TO THE BLUEST chip before you pyramid down.
i say 99% sure. Actually who can be sure of anything in the Market? Not even Mr. Lehman Brothers right? So who are we? Nothing!
Averaging up is a normal trading strategy with leverage. When trading on margin, it is ridiculous to average down.
i never use margin as i am KIASI. Besides just like spending within or below your means, to me it applies to investing too. KIASI lol!
(17-10-2013, 09:45 PM)Temperament Wrote: [ -> ]i never use margin as i am KIASI. Besides just like spending within or below your means, to me it applies to investing too. KIASI lol!
Even with no leverage i think the same principle applies. If the market moves heavily against our views, we must sometimes consider that we're wrong. Conviction can be a double edged sword and sometimes it's better to cut and live to fight another day.
What I read and believe is that averaging down can only work with indexes or funds.
If applying to a single company, it will be far too risky, as the company could be really in trouble, or some major shareholder may buy out the company at a low price in the future.
(17-10-2013, 10:11 PM)NTL Wrote: [ -> ]What I read and believe is that averaging down can only work with indexes or funds.
If applying to a single company, it will be far too risky, as the company could be really in trouble, or some major shareholder may buy out the company at a low price in the future.
I think it has more to do with personal circumstances. If the investor is drawing a stable income and does not depend purely on the investment, averaging down in bad market conditions is not too dangerous. If you depend solely on your investment to pay the bills, it might be extremely risky. As Keynes said "the market can stay irrational longer than you can stay solvent."