Welcome to City-Data.com Forum!
U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics > Investing
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 05-01-2017, 09:25 AM
 
7,401 posts, read 4,623,873 times
Reputation: 5472

Advertisements

Quote:
Originally Posted by Lowexpectations View Post
Because it's not factual that's what made me think that. Your rationale of the inflows to support market growth are entirely made up

How do you know it's not factual?
Reply With Quote Quick reply to this message

 
Old 05-02-2017, 04:55 AM
 
2,670 posts, read 2,609,708 times
Reputation: 5244
I did an analysis of investing lump sum vs. 1/8 per quarter over two years, from 1980 to present. I.e., what would an investment be worth in March 1982 if it was put into the S&P500 as a lump sum in March 1980, vs. putting 1/8 into the S&P500 in each of March 1980, June 1980, ..., December 1981. Then, what would an investment be worth in June 1982 if it was put into the S&P500 as a lump sum in June 1980, vs. putting 1/8 into the S&P500 in each of June 1980, September 1980, ..., March 1982. Etc.

I did not include dividends from the stock already purchased, or investment income on the balance not yet invested.

Also, I only did this quarterly, not daily, but I think it's a reasonable approximation.

The results were:

average: lump sum up 20.6%, spread out up 11.7% (lump sum 8.0% better, 1.206 / 1.117)
best: lump sum up 76.8%, spread out up 43.0% (lump sum 23.6% better, 1.768 / 1.430)
worst: lump sum down 43.8%, spread out down 38.1% (spread out 10.2% better, 0.619 / 0.562)
Reply With Quote Quick reply to this message
 
Old 05-02-2017, 05:02 AM
 
106,249 posts, read 108,257,613 times
Reputation: 79791
dividends account for 1/4-1/3 of all the gains so that compounding along with that lump sum amount would drive things much higher since reinvested dividends would be compounding too . .

the sequencing of the gains and losses matter too . don't forget up 100% the first year and down 50% the next is zero gains but that averages out to a 25% average return since you have 100% gain minus 50% loss divided by 2 years , which works out to an average of 25% , which we know is wrong . you would not be up 25% you would be flat .

so there is a lot of work that has to go in to doing a comparison .
Reply With Quote Quick reply to this message
 
Old 05-02-2017, 05:15 AM
 
2,670 posts, read 2,609,708 times
Reputation: 5244
I accounted for the sequence of gains / losses, this is the total capital at the end of 2 years.

Stocks would earn dividends, cash balance would earn interest.
Reply With Quote Quick reply to this message
 
Old 05-03-2017, 06:16 AM
 
5,722 posts, read 2,182,031 times
Reputation: 3867
Quote:
Originally Posted by Aredhel View Post
But DCA doesn't spare you from that, as its endpoint is the same: 100% of the funds invested. It just takes longer to get there. Once the money's in, a market slump will affect it the same way no matter how it got in.

If you can't watch $250k decline to $150k without doing something rash, then that $250k should not be invested in equities. Pretending that DCA affords some protection from that is silly.
Agree but if you don't have a lump sum DCA into an ETF on a monthly basis is a great way to invest. I prefer DCA into commision free ETFs monthly and lump sums to purchase individual stocks to cut down on fees.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics > Investing

All times are GMT -6. The time now is 06:43 AM.

© 2005-2024, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top