Wow, I only just read this because gazpacho responded too it and you really couldn’t be more wrong. There is such a thing called the marginal utility theory of money, which says that expected value is not the only consideration a rational investor takes into account. There is a certain “utility” associated with certain sums of money such that tolerance for risk/reward can be “rationally” skewed. Utility theory shows us that while a bet may have a higher postive expected value, it may still not be advisable. It is also true to say that while a bet may have a negative expected value it can still be advisable.
Case in point: I offer you a bet wherein I’ll give you a 60% chance of doubling your money. Now you’d be an idiot not to take that bet right? What if I said that the minimum bet was your entire net worth - is it still a rational bet? This illustrates why insurance, while having a negative expected value, may still be a rational bet.
There are many permutations of these types of choices. for instance say I offered you a choice of one of the following scenarios:
A 95% chance of $1,000,000
A 5% chance of $25,000,000
Now option 2 has a higher expected value but for someone making $25,000 a year, you would hardly call them irrational for taking option 1.
You can read a bit more about Utility theory here or just google it:
Without verifying or disputing the figures in the investment table you presented, I have this to say:
As it is, you have not considered the value of what the guy playing BLSH still has in his mattress. Since (using your figures) he has made only one purchase of $100 that is now worth $220.75, he has $1100 in the mattress, for a total savings value of $1320.75. The guy playing DCA has nothing in the mattress, of course, so has a total savings value of $2230.14. In my scheme, I imagined that the guy playing BLSH would put $700 (his monthly $100 + the mattress savings) into the market when the price fell for the second time to 9.06, giving him around $1550 + $500 in the mattress for a total of around $2050. It is interesting that a BHSL strategy would pay off almost as much as DCA in the scenario you presented, even disregarding fees and potential interest lost to the mattress.
In any case, my theory as presented does not apply to investing in the past. Anyone can find an historical price sequence that will make his pet strategy shine. What’s that about? Why don’t you propose a strategy and I pick the 12 month period in the past? It’s so crazy an idea that the moderator would have to throw this discussion onto the flying-saucer message board.
KidCharlemagne,
Well, my hypothesis that any investment strategy is as good as any other does not depend on assumption of a random walk, but only on the assumption that you cannot predict stock movements. The chief difference between a professional (who may or may not be an expert investor) and an amateur is not in ability, but that the professional, like the priest, has no qualms about taking others folks’ money and trading on their ignorance and gullibility. Martin Luther tried to bust that system as run by the High Priest and failed, so who am I to imagine that I can succeed in debunking the Financial Advice Indulgence?
My comment on the boxers is a way of saying that, if only experts played the market, one group of experts would lose exactly what the other group won, and a tyro who had bought the index would do as well as the average expert, by definition, and better than the average expert once fees are considered. JWM, Merton and Scholes lost in a market few tyros were in, and all of what they lost was no doubt gained by other experts.
And now that I think about it, their case may illustrate a big difference between arbitrage and investment. In the LTCM fiasco, I know of no index fund that a tyro could have invested in to beat the experts, since there was no “enterprise” and thus no long-term market gain in the usual sense. The social value of arbitrage, of course, is that it serves to keep markets efficient.
jimbino I don’t know where to start. I appreciate and generally agree with your disdain for all things pedaled as investment wisdom. I made my career on fading Wall Street Week and I never made a single dollar that wasn’t from direct speculation. If you believe that stock prices aren’t random but aren’t predictable then I assume you believe, as I do, that they’re chaotic( but with various levels of determinabilty). Rather than make a long argument, let me just ask you a question: Do you really want to make the statement that no one can consistently outperform the index or that just most people can’t? Regarding expertise ala LTCM: You can be an expert and act like one 364 days out of the year, but if you’re a piker/plunger on the 365th then you’re still not an expert.
Maybe shares don’t matter in the long term, but short term they’re a useful way to understand what’s going on in the mutual funds my money goes into every single month. If the cost of shares have nothing to do with dollar cost averaging, then I must be confusing it with something else. I thought it meant that when stuff was cheap, the same money buys more; when stuff is pricey, the same money buys less.
I didn’t think DCA would ever dictate that someone with sporadic income would borrow (?!?) to invest a rigid, inflexible monthly amount. I never thought of DCA as an investment rule, but rather a philosophy that encouraged people with regular contributions not to dick around with them and change strategies every month according to the market. If you can’t make regular contributions, well, it doesn’t apply, IMHO. If you’re only buying sporadically, then market timing seems more important to me.
quote:
“OK, I don’t belong here, I am a trader not an investor. If I own 10,000 shares of a stock that goes up 25 cents, I make $2,500, if I own one share I make $0.25. As a trader, the number of shares makes a world of difference to me.”
If you need to know the number of shares you own in order to do the calculations, that’s fine with me. I’m a rocket scientist, not a trader, but I know that if I write down the daily share prices and how many dollars I invest, I can always figure my worth without having a “Number of Shares Owned” column on my spreadsheet!
Scylla,
quote:
“Nonsense. I was simply back-testing your strategy to see if it would have worked. It would not have.”
Is “back-testing” one of those magical phrases like “dollar cost averaging” and “asset allocation?” It sounds like Financial-Advisor-speak for “investing in the past.” If you have access to the actual data, I would appreciate it if you apply “back testing” for, say, the DOW using DCA, BHSL and BLSA for the entire 80-year period starting in 1923 and tell me the results. While not definitive, they would be interesting.
I can agree with your statement that the best strategy can be defined as the one most likely to produce the required return for any degree of risk. But diversification is not the answer if it carries elevated transaction costs. A better choice, as I said earlier, is to put ALL your money into an index fund that carries the degree of risk you can bear, cancel your WSJ subscription and just listen to NPR.
But the best choice for a rational person is to maximize risk if the expected return is higher. I have no problem placing everything on a single hand of blackjack, just as I place my life on a single determination that there is no god, having no intention of taking out insurance by praying or going to mass.
You don’t need to flog a dead horse: I agree, diversification will save you both pain and great elation. You are advocating picking the average girl, climbing the average mountain, thinking the average thoughts. Diversification (averaging all peaks and valleys) is a good way to get you there. Fine with me, and if I were advising a wimpish, fearful, religious person, I would recommend diversification, too. But it is an error to assume that diversification is the cup of tea for that guy who floats over Niagara Falls!
As far as asset allocation’s having a higher probability of producing an expected return through diversification, I agree. But that’s like saying that, by dating 100 girls at the same time, you have a higher probability of spending time with an average girl than if you picked just one at random out of a blind sack. So what? Who wants to spend all his time driving around, sending flowers and relating?
Providing proof to back up my assertions that you can practice insider trading without getting caught and going to prison presents more legal than scientific problems, of course. I’m afraid we’ll just have to wait and see if Martha Stewart and her crony (apparently the only two who have tried it) ever go to prison.
quote:
“It seems to me that it’s your belief that risk tolerance has no place in investment, that absolute return is the only metric by which to determine investment success, that life insurance is totally useless and a con game played upon the mentally weak, diversification is useless, and buying only index funds is the only answer for everybody, all the time.”
Yes, I would have to say that expected return is the only metric and that risk avoidance, to the extent that its associated fees diminish expected return, is irrational behavior. There is no doubt that life insurance is always irrational, since the expected return is extremely negative and no strategy of buying 10 life-insurance policies instead of one will change that. Index funds are great because of their low fees, but otherwise I can also advocate two other strategies: throwing just one dart at the WSJ and spending every last dime the minute it comes your way.
Scientologist,
quote:
“I wouldn’t let you within 100 yards of my money.”
You must have me confused with some Financial Advisor. I’m an honorable guy who would never take advantage of a rationally disabled person. In my younger days I tried that, selling brushes and fortune telling to suckers, but soon moved on to something more challenging (but unfortunately less productive in the Darwinian sense). But do watch your money; the Democrats are after it, and the handle you’re using here seems to brand you as an “easy mark.”
gaspacho and KidCharlemagne,
I’m aware of utility theory, but entertaining risk of great loss so as to take a chance for great gain suffers only in the case of DECLINING marginal utility. A person’s own utility function depends on his philosophy. There are those who clearly avoid great downside risk by doing nothing but pray and go to church. There are others who will put their lives at increasingly greater risk to climb Everest the second time. The second time making love can be more fun than the first. There are street people who consider the 1000th dollar worth more than the first and who will eveb take a job that pays less than the welfare they have to give up. And so on.
Eventually, you will experience a declining marginal utility for most things if you get enough of it, I suppose, though utility can rise or fall numerous times before you get there. Is waking up one morning worth less or more than it did yesterday? Well, a teenager will have a different opinion than an old guy will.
It is interesting that the poorer and less educated the American is, the more likely he will prefer a 1 in 100 million chance of winning a million bucks to the dollar he has in his hand. And it’s always true that gummint’s progressive tax policies tend to rob life of all incentive and encourage folks to do nothing but pray and go to church.
But I still maintain, against all odds, that it is worthwhile to get up in the morning and seize the day, maximizing the upside and corresponding downside risk.
OK, NOWWWW I understand your strategy of BLSH. You are going to “mattress” your monthly $100 investment until the stock drops, then you will put $100 + accumulated mattress money into the stock. Hmm … let me think about that one.
Not all that bad of I strategy I suppose. I use a strategy similar to your BLSH in trading. I wait for a stock to drop, but I also keep an eye on the volume. When the down-volume dries up, typically the shorts will cover and the longs will go bargain hunting. I try to buy at this point and play the bounce. I’m going to do exactly that with JCOM this week.
Backtesting is nothing magical. It’s seeing if a strategy would have worked in the past. Unless you are willing to argue that the markets are going to behave wildly different from their standard ebb and flow it is a good indicator of the efficacy of a strategy.
People who say “This time it’s different” usually don’t know what they are talking about. Things like the internet bubble have historical precedence going back thousands of years, witness the great amber bubble of ancient Rome, or the Ductch tulip craze, or even the biotech bubble of the late 80s or the railroad boom/bust.
The economic cycle repeats itself with depressing regularity. More importantly back testing is the only available means for testing the efficacy of a given strategy.
Since these are your strategies, you can back-test them yourself (as you should have done before you decided that they were so great.)
Untrue. Those transaction costs would have to be elevated to such a degree that they cancelled out the benefits of diversification. An elevated cost is not necessarily a bad thing if it increases return or lowers risk in excess of its cost.
Why an index fund? These carry transaction costs. Besides, index funds are my bitch. It’s playing poker against somebody who has to show all their cards. For example, if XYZ stock is number 503 in the SP 500 and continuing to gain market cap, it’s a simple thing to purchase the stock. When the S&P gets rebalanced, every S&P index fund in creation is forced to buy that stock on that day. Usually, you get a pretty good price move, and you can make a fair amount of money at the expense of idiots who buy index funds.
Additionally, there are lots of strategies that consistently beat their indexes over long periods of time, such as the dogs of the Dow, or Alpha surprise. Why by the index when you can add another level of discrimination to your stock selection and lower your risk while increasing your return.
Lots of funds don’t beat their index. Some do. Some do consistently over long periods of time. So what if the expenses are higher? If the net return is higher after expenses then it’s a good deal. Many of these also have betas lower than their indexes signalling more return for less risk.
Upon preview I see you talking about shooting for the moon. If you wish to do this why on earth would you select an index fund which gives you what is by definition a mediocre return?
Finally, an index fund is diversified.
That’s just crazy. If I have $10,000,000 and I only need $100,000 to live on per year, all I need to do is get an inflation adjusted after tax return of 1% to meet my goals. I can by treasuries which are very low risk and be set for life.
If I followed your advice, you couldn’t make my life any better, but you might lose it all and ruin me.
One must be aware of and plan for the consequences of failure. With 13 years of experience holding various money management positions I have learned one basic fact.
The goal to successful investing is not to screw up big. The whole of responsible investing is nothing more than managing risk so that you don’t take a catastrophic failure in any given scenario. After all, investing in stocks and bonds is a positive sum game. The odds favor you if you don’t screw up.
This is not a philosophical discussion. We’re talking about immediate consequences. If as you say, you are foolish enough to be willing to place your entire net worth at risk on a single gamble, that pretty much sums up the value of your investment advice.
You seem to be under the impression that diversification lessens potential return. This is not true, strictly speaking.
If I choose ten stocks it is possible that all ten will perform extraordinarily, giving me just as excellent a return as one excellent stock pick.
What asset allocation and diversification due is simply skew the distribution of possible returns to give an investor the highest probability of achieving an expected return.
Diversification does not simply lower return possibilities. I can still shoot for a 40% average annual return with a diversified portfolio and take a huge amount of risk to achieve it.
What diversification does is get rid of unnecessary risks that can be managed.
It is foolish to take risk that does not increase return possibilites. Nondiversification does exactly that. It creates return-free risk.
We really don’t need analogies here, the language of investing is defined and precise. But if we must, diversification is not like choosing 100 girls at random. The “girl” of investing isn’t the investment it’s the return. If you’re after a girl you want to do everything you can to increase your chances of succeeding with her.
Now you may say “All that matters is my personality,” and just concentrate on that in your nondiversified fashion.
I on the other hand will take a shower, and shave and put on nice clothes so I’m looking my best, because not doing this simply increases my chances of failure without any upside. I will also have breath mints handy, and perhaps a small gift to show my affections. I will also choose the environment for the date to be as pleasant and fun as possible.
You on the other hand, may pooh-pooh diversification and simply count on personality. You will show up dirty, dishevelled, smelly, and without any real plan for your date. Why take her somplace nice? You’re Mr. Personality, McDonalds will do.
Let’s see who has the better chance of getting a second date.
Again, not really. The SEC has sophisticated software, and they track stock purchases and sales.
For example, when the potential sale of Hershey was announced, the stock moved 10-15 points. The SEC looked at purchases that occured in the days and weeks leading up to the announcement, to see if there was any unusual volume. Even if there is not, they select large block trades and see who did the buying, and if that buying was characteristic of the person doing it. If it was not, than that person gets a phone call and has some 'splainin to do.
The problem with attempting to trade on material nonpublic information is that you have to have to have that information. Having that information means by definition that you are in a position to have it. Being in such a position means that your activities with regards to that security are scrutinized. In most cases they will need to be justified before the fact.
Martha Stewarts situation is public because she is famous. Lots of nonfamous people get caught.
Trading on nonpublic information is like having everybody in the room know that you’re the only guy in the room with a gun and then trying to get away with shooting somebody.
This is not true, not even under any form of the efficient market hypothesis. The growth of the economy is not always a factor in the price of a given stock.
Some have a positive correlation with the economy in general, some have a negative correlation, and some are noncorrelated.
Consumer staples tend to be good examples of noncorrelated securties vis a vis economic growth.
Little fortune telling is necessary. All you need to predict with DCA is that the stock will trend both up and down over the course of your investment period.
What DCA does over a time horizon that includes macro fluctuations is make you buy more shares when the price is relatively low within the context of the time period and fewer shares when the price is relatively high.
Given a fluctuating environment with both ups and downs, DCA tends to give you a lower cost basis.
“Rather than make a long argument, let me just ask you a question: Do you really want to make the statement that no one can consistently outperform the index or that just most people can’t?”
Since I believe that any strategy is statistically as good as any other (as long as you have no a priori information of the future price movement) in a random, chaotic or ANY OTHER market, I must conclude:
The average investor will ALWAYS perform exactly as the index does (if transaction costs are ignored).
There will be more investors who underperform than who overperform (but only as a result of the fundamental characteristics of a skewed normal distribution where the downside is limited while the upside is not).
The odds are that there will be one person who accidently consistently outperforms the market and to him, as to Warren Buffett, George Soros and JWM (before the fall), will be ascribed great intelligence and understanding. Whereupon he should immediately publish a book explaining his great insight, run for office or die. (What would Jesus do?!!) Only if he dies will he be forever known as the guy who consistently outperformed the market. Is there anyone still reading “Liar’s Poker?”
CrankyAsAnOldMan,
quote:
“If the cost of shares have nothing to do with dollar cost averaging, then I must be confusing it with something else. I thought it meant that when stuff was cheap, the same money buys more; when stuff is pricey, the same money buys less. I didn’t think DCA would ever dictate that someone with sporadic income would borrow (?!?) to invest a rigid, inflexible monthly amount. I never thought of DCA as an investment rule, but rather a philosophy that encouraged people with regular contributions not to dick around with them and change strategies every month according to the market. If you can’t make regular contributions, well, it doesn’t apply, IMHO. If you’re only buying sporadically, then market timing seems more important to me.”
First of all, DCA does seem to imply borrowing in lean months just to keep up the nonsense. While the only value of DCA is that it keeps money out of the mattress, one of its stated purposes is that it relieves a bloke from having to worry about price fluctuations every month. You can be sure that the guy practicing DCA who forgoes borrowing that would enable him to invest in a lean month will be condemned to start checking stock prices every day, and the odds are 50/50 that he will end up depressed and take up beating his wife.
Secondly, there is no such thing as “market timing,” at least prospectively, which is all that matters for the investor. “Market timing” effectively means adopting a strategy of buying only when you can be sure of selling at a price beats the index and otherwise keeping your money in the mattress. This is schizophrenic for the person who advocates DCA. If you can buy only sporadically, you should put it all in when you have the dough and not wait for the “right time.” Remember, since any strategy is as good as any other if you can’t predict the future, get your money out of the mattress and into the low-transaction-cost riskiest investment you can stand.
The old canard about the importance of number of shares and of scoring more shares because of a price drop needs to be killed off once and for all, and I guess I’m the man to do it, since it was my objection to Clark Howard’s obsession with that nonsense that was responsible for my starting this thread in the first place. Here goes.
Let’s suppose fund A starts the year at a share price of $100. The first bozo puts $100 in the mattress and $100 into porno flicks every month for a year. You follow DCA, putting $100 into fund A and $100 into porno flicks per month. I follow a different strategy, putting $200 a month, for eight months into fund A, then sell off shares worh $100 a month for the last four months so I can cram my $1200 into stale porno flicks in those last four months. I was not practicing DCA, but a different compulsory investment scheme.
Suppose the fund has risen in value at an APR of 7%, while fluctuating in price throughout the year and closing at a share price of value of $107. In those last four months, you were buying and I was selling. Who is better off?
Well, it all depends on the movement of stock prices in all those intervening months. For example, for the share prices in column 2, we get:
Month Share price Mattress Your Holding My Holding
Here, my strategy came in first, DCA second and the mattress third. But this is only one scenario. The stock might have ended down for the year. The share price might have peaked, instead of fallen, in the middle months. What could we conclude from an analysis like this if we repeated the run for all possible patterns of share price movement and all possible strategies?
The mattress always turns out to be the worst strategy in a generally rising market and the best in a falling market.
DCA turns out to be the best strategy in some scenarios and the worst in others.
If you can’t predict the price movement, DCA is no better or worse than ANY strategy that keeps your money out of the mattress and into fun or the market.
The value of DCA, as in all the other investment strategies, is ONLY that it gets your money out of the mattress.
DCA has NO value over any other investment strategy and so, perforce, has NOTHING special to offer relating to its scoring more shares for you when the share price is down!
ccwaterback,
It disturbs me that you seem to think I recommend BLSH. At the risk of repeating myself, I consider all strategies that get your money out of the mattress and into investment to be equivalent. What this implies that if you have a fixed amount you can afford to invest every month (who really does?), you should use DCA, but not because of any “dollar cost averaging.” And if you have a variable amount, you should invest it all, whatever that amounts to. If you come up short one month, sell some off to get what you need.
Get into the market. Minimize taxes. Minimize transaction costs. Pay no attention to share prices. Consider the birds of the air and the beasts of the field; they sow not, neither do they reap …
You do realize that no credible source, academic or otherwise still believes this don’t you?
Also, I don’t see how your reiteration of utility theory helps defend your statement about insurance necessarily being irrational.
“You do realize that no credible source, academic or otherwise still believes this don’t you?”
What is the “this” you are referring to?
I wasn’t trying to apply Utility Theory to insurance, but will be happy to explain why voluntarily subscribing to insurance is irrational behavior for me or anyone wishing to save money.
Take flood insurance, a good example to consider since the data are available right on the web at the FEMA website www.fema.gov/nfip/. Folks who live in a 100-year flood plain are forced to participate in the program if they wish to finance their homes, etc. A 100-year flood plain is defined as the area for which there is a 1% chance of flooding for any given year. You can see from the gummint’s data that it pays out about 65 cents on the premium dollar received every year.
This means that the person who needs to insure against $130,000 in flood losses will have to pay an annual premium of $2000. His expected loss is, of course, $1300, by definition. The 22-year-old person who pays cash for his home and forgoes flood insurance banks $700 per year, on the average, after paying his own flood losses. $700 per year invested in the S&P 500 index at an APR of 7% will be worth some $207,589 when he retires at 67. To willingly participate in that game is irrational behavior, just as it is irrational behavior to play roulette, which pays 95%, or even blackjack, which pays more, if your goal is to make or save money. If your utility function values entertainment, insurance is even more idiotic, since it carries negative entertainment value for most people.
It is particularly irrational behavior – even schizophrenic – for the person who has already cast his vote for risk taking, such as the person who climbs Everest, has unprotected sex, falls in love, etc., – activities for which insurance is generally unavailable. If the idea of insurance is to protect against unforeseeable or devastating losses, these folks have it exactly backwards: flood losses are among the more predictable and the payout is capped at $130,000 or so, whereas losses resulting from the risky behavior are less predictable and certainly more devastating.
Now, most insurance is even worse than flood insurance because of the enhanced adverse selection, cherry picking and moral hazards involved. Two of the worst are health insurance and car insurance. You can choose, as I do, not to participate in either of them, at least if you are a resident of Tennessee, Wisconsin or New Hampshire. (The worst is Social Security, but that is harder to get out of, though becoming Amish is still an option.)
The only real winners in insurance are the insurance companies, of course. Right now, doctors and drug companies think they are winners, but they will soon end up gummint employees and price-controlled industries (which will serve them right!).
Relative winners in health insurance are hypochondriacs, women, older folks, bad livers, risk takers and those with bad genes. One clear loser in the USA is the white, single, young, healthy, chaste, sedate male who hates to see the doctor. He gets royally screwed. If he knew to what degree he were subsidizing other folks and their kids, he would drop out. This would be an example of adverse selection, and could quickly lead to devastation of the insurance business because of the snowball effect that spreads first to the next-most healthy, then on up to those on death’s door, who would end up facing monthly premiums of $10,000 once all the others dropped out. That’s why insurance companies hide the stats and why Hillary wants to force us all to sign up.
Car insurance screws the safe driver, the low-mileage driver, the driver who has lots of cars and who doesn’t stage accidents or inflate damage claims, to name a few. Its effects are highly at variance with the goals of good citizenship.
The stakes are very high. My best guess is that health insurance and car insurance pay out about 20 cents on the premium dollar, once all the extraneous factors like drug and medical care price-inflation and false claims are factored in. The NY Times reported on 10/25/03 that the “average annual cost of [health] insurance premiums has risen to $9,068 … for family coverage…” The result is that the young family man, who self insures, paying cash for his own drugs and medical care (probably in Canada, Mexico or Brazil), can expect to bank some $2,135,198 in 45 years of his working life.
Now if masochism figures high in your utility function, insurance is a very good deal, but participation is irrational in the financial sense.
This is so off-topic that it belongs in another thread!
The “this” I was referring to is the notion that traders with statistically significant returns are merely anomalies.
Regarding insurance: yes it belongs in another thread so I’ll just add that your example of insurance is mandatory insurance and the reason it’s mandatory is that rational people didn’t sign up for it. And since it’s mandatory, insurance companies can make the premium/payoff even worse. But that’s not the fault of the insured.
Dollar cost averaging was touted as a way to make money without effort or thought.
A friend of mine had stock in W.T. Grant during the first dollar averaging mania. He never managed to get his average cost/share low enough to overcome the fact that his value went to zero when the company folded.
Fundamentals still count in spite of the salesmen’s pitch that “the old rules don’t count, we’re in a new era” pitch.
What, are you looking for anything on which to disagree with me? If I were to say that the present value of all future expected dividends is included in the price of a stock, would you take exception with that because some stocks never actually pay dividends? Whether or not the growth of the economy affects the price of the stock, it is included. It’s part of the formula. Sometimes that term is equal to zero, but singling out those occurances and saying that in those particular cases, it’s not included seems to me to be rather silly. It’s like saying “f is equal to 2x+y, except when y is zero, in which case it’s just 2x”, and insisting that f is not equal to 2x+y when y is zero.
As I already explained, if the uptrend precedes the downtrend, then DCA will result in a loss.
So? What’s the benefit in that?
Lower than what? DCA allows you to have the satisfaction of looking back and saying “Wow! I could have paid more for the stock I have now!”, but that doesn’t mean that DCA is superior, only that it isn’t the worst strategy. It’s really a schadenfreude strategy; it doesn’t make you any better off, but it does make sure that no matter what, there’s always someone who did worse. It is promoted by simply presenting a situation in which DCA did better than another strategy, rather than showing that the expected value is higher (because it isn’t). Scylla, do you really think that DCA yields a higher expected value? If so, are you in the market to buy a bridge?
Can you present a cogent arguments for your investment principles? Specifically, why is cost-dollar-averaging a poor investment strategy? Running a spreadsheet does not constitute a sound mathematical argument. Why should I put faith in your expectations of the different strategies versus the expectations of well-known economists?
Likewise, Scylla can you provide any cites for why cost-dollar-averaging is a good investment strategy?