36. Timing Investments and Dollar Cost Averaging

Timing investments is not straightforward, and there are ways of making the process pretty efficient.

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[jc033829]

if dollar cost avg is a great way to get in, then what is a good way to get out. if you dollar cost out you will end up selling more units at a lower price and less when its higher. so would that mean its best to sell shares/units to exit a position?

[savingandinvesting]

Typ. implicitly assumed that save/invest/buy over a v. long period where dollar cost averaging makes big difference and that selling over much shorter time period. DCA is way of building pos. (and can use index funds, retirement/tax beneficial structures like 401k plans in conjunction). On selling, most sell certain nr. of units periodically or even as a lump sum - might seem haphazard w.r.t getting best price - assumption is time horizon not there (& benefit of DCA captured on buy side).

[TreachMarkets]

This doesn't work, and is dangerous advice. It assumes that stocks go up and down evenly over time. In reality, some stocks do this, most stocks go up slowly and plunge every now and then, and some stocks will plunge 90% and never recover. Because of the latter condition, dollar cost averaging is like playing russian roulette, it works great until you lose all your money.

[savingandinvesting]

Aggressive, and mistaken: 1. Does not assume that go up/down evenly, only go up and down. 2. Not a suggestion to buy individual stocks, but how to buy investments that volatile in short term, but go up in long term (as stock market has on ideas, sweat, invention) 3. Index funds prob. best for most investors. If some (or many) stocks plunged 90% and never recovered, would be a strong argument for no one ever to invest in stock market and end of world we live in today -- prob. not the suggestion.

[TreachMarkets]

Although the market in general has gone up, there is an unmentioned graveyard of stocks that have gone down for good. The point about index funds for the average investor is well taken, as individual stocks must be watched like a hawk.

[savingandinvesting]

Thanks -- Sounds like your suggestions are tailored to people who have the time and desire to watch stocks on a daily basis - traders. My site as I am sure you prob have seen is about financial education - saving and investing for long-term - and understanding financial terms and concepts in this world that is mysterious to too many - not trading. If you don't have the time and skills, trading can be very very costly. Different focus I think - thanks - best regards.

[caliboy312]

you'll lose your mind trying to time the market, no offense man, but its best to follow the ordinary DCA system.

[eleanoquilly]

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[zolee1]

Very well put Michael.

Love the videos and information!

Keep them coming!

[matcargo]

This video give me more infor abaout dollar costing average nice video

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