His suggested approach is based on the assumption that one’s valuation is always correct. There are many stocks which are valuation traps or look expensive because of wrong valuation approach. Using DCA on an index fund means we admit we don’t know enough about the actual value of the stock but believe the stock market should go up in the long run. I believe in this assumption more than the one he suggested - we can know exactly how much the stock is worth at all times and the value is not affected by our emotions.
The way I see it, stocks (or index funds) go up on average. So if I DCA in, I’m basically trying to time the market. That, on average, is a bad approach. DCA delays the earnings. I think DCA is not a good idea on average, other than to play psychological games.
I understood it simply. Buy a business only when it's cheap, not when it's both cheap AND expensive. Doing it this way dramatically increases your returns.
It's completely outlandish to say dollar cost averaging equates price to value. DCA was favourite practice of Benjamin Graham, the founder of modern value investing. Assuming the value of a stock stays the same, you get more value for each dollar you invest as the price falls. This does not sound like equating price to value.
Phil, you are giving wonderful advices, but you didn’t get this one right. First, I would point out two fallacies in your argument, then I will show you what dollar coat averaging is good for. The to fallacies are the followings. In your first example, you deliberately fabricated your scenario to fit to your argument, and also assumes that the value of the company stays at $20. But what if it is a wonderful company, growing and growing. You would miss Apple from the beginning, and many other good companies with great returns. You can wait for a dip, but the opportunity cost that you misses is greater than what you win on the dip in the price. Graham shows it to you in his book. The second issue is in your last example, when you assume a flat market. But in the reality, it is hard to show any 10 years period when the market is flat. It is growing continuously in long term, as the economy is growing. What DCA is really good for? S&P500, or DJIA has a long term return of like 5-7% above inflation (I’m not sure about the exact number). This is way above the return of a risk-less investment in Treasury. You put x% of your paycheck into an ETF, and you have a virtually risk-less investment with higher return than in the Bond market, without any effort or knowledge in economy and finance. Good for most of us. Professionals can do better, and I believe that’s what you tried to explain, but that is misleading without explaining the whole pictures, the pros and not just the cons. And how professionals use DCA? Two ways, complementing each other.You know your favorite company has a great price, but you don’t know where the bottom is. So you DCA all the way while it is below value, and stop when it is above. From the other perspective. You DCA a constant 10% of your money, but always into whatever is the cheapest at that time. And you avoid keeping too much money in cash, and missing the bull market. The later might have been a great strategy in 2017, when the market was already overpriced, and a professional might wanted to go into cash to profit from the upcoming recession. But the market just kept rising all along, and maybe the recession won’t even push back the price to below2017 level anymore. So I say do DCA if you want to match the market without effort, which is already greater profit than most people do. And mix the concept of DCA with your strategy for greater return with greater effort.
Zoltán Juhász Interest rates need to be normalized to the 4-4.50% range. Only then can you can clarity of the investment landscape. With rates so low, people have plowed their capital into stocks, often times doing so foolishly.
Roky Erickson rocks Interest rates will never normalize. The economy is an endless oscillation between bull and bear markets, so interest rate is also always changing. Also there is no ideal interest rate. The ideal is always different, as other properties of the economy is changing.
This is actual high quality advice. I salute you sir. DCA works perfectly fine for passive investments like monthly ETF savings plans. You can buy MSCI World / S&P 500 ETF shares passively through many brokers without any transaction fees. Over a long enough period (10-20 years including bull and bear periods) you will get the exact long term return % of the index. You can split your monthly investments into a passive and active component, so you have a completely risk-free (because if the index would never bounce back, the whole financial system and world economy would have to collapse and then all your other non-invested money wouldn't be worth shit either) and also completely effortless index level return and you can pursue a value investment strategy like Phil preaches. Just look for relatively undervalued companies with good growth potential and DCA between margin of safety price and actual value. This way you can mix some growth investment strategy in there as well and you don't have to wait till you sit in cash and go all in. It is VERY IMPORTANT to start AS EARLY AS POSSIBLE and pump as much money AS HARD AS POSSIBLE into your investments to exploit compounding. And when you've compounded enough shift some of your wealth into something like a dividend aristocrat stock, quit your high income job, sit in your Porsche and enjoy massive cash flow from your dividends supporting your decadent unemployed lifestyle.
This is why 401Ks work so well for the average Joe. DCA is for people who don't have chunks of $10,000, 100,000 or 1,000,000 to plop down, and with firms offering $5/7 dollar trades, it's very economical to do. You can invest $500 or $1,000 a month as an Apple or Amazon keeps rising. Face it, when you save all year and have 10K to invest, your mind plays tricks and you might not pull the trigger.
Well put Zoltan. This video seems more suitable for experienced investors, however it is not practical to say " there are many business' on sale out there". If it was easy to know what companies were on sale, then they would never go on sale. I have been experimenting with Value Added Averaging in my retirement account, and would love for some feedback on if anyone else is investing with VAA.
Would it be possible to make an introductory video on how to evaluate companies and the real value of a company and its stocks price. I am learning from your videos great deal and I do appreciate the work and efforts that were put in creating your outstanding channel. Thank you!
@@RemcoAlexanderPhD This comment was made 2 years ago... he has since recorded the requested video tutorial. I hope you research your companies better than this...
I subscribe to Phil's podcast which is really great. Some really great advice for retail investors. I would just add two points or more of a question for this particular video": 1. It is true that DCA is not working as well as buying at discount or going all in at once. Many studies have shown that. However, the majority of retail investors have no choice but to DCA. In our 401k's we invest as we get paid. In our brokerage accounts, the same thing. We can invest periodicaly only when we get paid. We don't have huge piles of money to go all in when prices are cheap. Yes, we can save up and not invest until we accumulate certain sum, but that is also a form of DCA, just out of the market. Not to mention we would be out of the market while we are accumulating cash, missing all kinds of opportunities and loosing to inflation. 2. The second point is that unless we are in a total market crash, it is very hard to find great companies cheap. Especially as cheap as you mention in your video. How can a retail investor find great company cheap before everyone else does, especially big money and institutions? How come no one else is buying this stock this cheap? Am I the only one who stumbled upon a golden egg that no one knows about? Why is this great company this cheap in the first place and we are not in the crash?
I think Phil tends to exaggerate how cheap a stock should be, because he knows we're going to break that rule anyway. Instead of buying at 50% off, for example, we might get tempted and buy at only 25% off. Whenever he gives hypotheticals I just tune out the numbers and listen for the underlying strategy.
VIP talk Yes, that’s right. DCA is popular because the average retail investor simply cannot pick out, never mind actually buy, the low priced good companies. DCA gets them into equities at a decent price, but not the very best price.
why would you bother, DCA'ing into an index fund is going to beat most active managers - including this guy probably - 95% of the time. Warren Buffet famously bet $1m vs the best hedge fund managers that over a 10 year period they couldn't beat an index fund... he was right... google it.
Big Investing operations have rules on which stocks they can invest in. One of those rules is that they can only invest in stocks with a certain market cap and float, otherwise their massive trades will affect the stock price to an excessive degree. Peter Lynch has written much about the advantages that dedicated retail investors have over larger institutions on Wall Street and elsewhere.
Unlike the other people here, I learned from my years as an individual saver to not use DCA for buying silver as a form of savings. Fortunately, I got in when silver was $6-7 per oz. What I did was buying silver as much as I could afford in the early years, and as the price got higher, I would stop buying or not buy nearly as much as before. When I sold out, I still made double what I put into it. Instead of using DCA... Let's say that you had $10k to work with for 5 years ($166.66 per month regardless of price). What I did was, if the price was lower, I bought as much as I could afford. When the price was higher later, I bought very little at the most, if at all. When the price dropped again, I would use the money I should have used (for DCA), but saved instead, in the previous months or year or so and then went all in with that money saved at a lower price. At the end of 1, 2, 3, 4, or 5 years, I would have ended up investing the same amount planned for the time period into a larger number of oz of silver. When I had to sell out, I ended up with twice my savings. I could have made more, but the market was moving so much that it was difficult without doing the work needed to judge where the exit point was really at. I just had a pretty low entry point. I still made far more money than a person with my low level of knowledge would ever get from a savings or CD account at brick-and-mortar banks, period.
Awesome! I got MNK at 2.50. Then purchased more at 1.70. Then I purchased more at 1.05! Cost basis is at 1.26. Now is around 3.50!. Returns 130%!!!! In 3 months!
New subscriber here. And a new investor (as of March 17). I’ve learned a lot from these millennial stock advisors on UA-cam, but I do not have the same timeline as they, since I’m a 65-year-old retired teacher/baby boomer. Thank you very much for all the information I’ve discovered on your channel! You have offered a wealth of information and I am so appreciative. My little portfolio has increased by $1900 since I played around with the cruise stocks and invested about $5000. More diversified now but it’s still cruise ship heavy. Trying to educate myself for future moves that might not turn out quite so lucky. Looking forward to learning for more of your video collection. You’re a great teacher!
I can agree what what he says about DCA when it comes to individual companies but not when it comes down to index funds. At the end of the day you can’t re invent the wheel if you read the books the Warren Buffet based his investment knowledge on they say to DCA even Warren Buffet says to DCA index funds so it’s good for some things but bad for others.
naught na, sure I'll give you an example.... I bought the stock MDR... And it started to go down... So I bought more, continued to go down.... A month later they went Bankrupt...... ETFs have tons of stocks, if 1 goes bankrupt, the ETF wont go to 0
@@Soljarag5 That's why it's inportant to research the company you're buying in, it becomes a gambling putting your money in company without doing the research.
Wow Phil, this was awesome. Thanks for bringing the hammer down on DCA. I realize what you are discussing is Value Averaging and that is the way to go. Gotta know your company. Love the way you pooh-poohed the advisors and market strategists with their efficiency crap. It's now May 4, 2020, and anyone who took your advice seriously is probably looking real good.
You will loose a ton of money being out of the market to inflation. Being in money market account and other short term cash investments the yields are to low. Where do you park your cash?
Honestly I find smart DCA on short term trades is perfect. I’ve had ridiculous algorithms trying to chase the market and it’s always late trend trading. However reversal trading is often early....but not if you use DCA just add to the position and keep your average tight to the price. Often it it is a reversal and if it’s not there is a pullback shortly after going into the new trend.
He is completely right because dollar cost averaging doesn't give you optimal results when you compare it with the compound rate of return with even a fixed price of a share.
So, DCA is the same as DRIP? According to what you are saying, instead of letting it DRIP, we should take the dividend in cash and buy other tasty stocks with that money?
If you pay attention to the Intelligent Investor, DCA seems to contradict one of Graham's principles: paying too high of a price for a stock. From what I got reading the book was to DCA into companies that are bargains and fundamentally sound. But, when Mr. Market is asking you to buy for a higher price it no longer makes sense to keep buying. Rather, if you are an enterprising investor and seek better returns, put your extra capital into bargains deals and stockpile those until they run their course. In One Up On Wall Street, Peter Lynch says that your portfolio can be filled with as many stocks as you need, assuming they are making you money and are profitable long term. The example that I saw regarding apple "If you don't DCA into Apple then you'll miss out on huge opportunities." While this is true the argument offers a flaw. Nobody knew back in the 80s and 90s that apple would make smartphones and dominate the game. At the time of early investment, this was just like every other tech company just trying to make out of a garage just like many cryptocurrencies do today.
my most stock is sono motors, I learn and understood this from reading rule #1, and I finally get when they say there is blood in the streets, I thinks it when most of the stocks turn from green to red
only someone profiting from selling ETF s would say something that stupid , everybody knows by the time you ve paid management fees and they ve overtraded , bought high and sold low rebalancing the average ETF loses 2%
"Understanding your business" is not easy. But a close watch on your stocks may NOT be speculative? So I should not ever consider dollar cost averaging ? No more automatic monthly contributions toward stocks? What's the game plan?
DCA is a powerful trading tool if you know how to use it properly. I trade stocks without stop loss (obviously i do my own research on the company and don't just jump in based on UA-cam videos) and DCA is how i get out either profitable or break even.
If your not willing to put in the work to do the valuation it's the safest best way.... Just like if your not willing to investigate individual companies then buying an index or mutual fund is safest.
From what I understand DCA can be used while invested in S&P. It would be a smart way for the average man to invest without having to stare at charts every waking minute of his life.
Started DCA early 2020. I was convinced the market would crash, so I would have never ever invested a fixed value. Sold with 30% gain. Yeah of course in hindsight I could have made better going all in. But given my evaluation at that time I wouldn't have invested anything at all.
Thanks for this info. Really helpful. I’ve been thinking about DCA investing but also taking an online course on value investing. Makes sense but wondering how hard it is to find these companies. And what about index funds and ETF?
The last major down turn was 2008. Putting your money into cash you would be losing approximately 20% to inflation. Where do you park your cash to keep up with inflation?
Michael Hunziker From what Ive learned one option would have been to be in the bond market. Interest rates were between 4 and 5 percent at the time then dropped to 2 percent during 2009 if I'm not mistaken. Then sell your bonds off at a premium and get back into the stock market when things were selling at a discount. (Thats assuming you saw the crash coming).
Michael Hunziker I think you mostly want to be in the stock market finding companies that are undervalued or in an index fund if you don't want to do much maintenance. I hear real estate can be a pretty good place too if you have the cash to get into it.
Michael Hunziker Phil does a lot of good bite size pieces and he's got a podcast by the name of invested. Another really good resource for info is a site called the investors podcast go to the podcast section and listen from episode one.
Read his book *Rule #1*. He's written there in detail about how to value a piece (share) of a business. Also, he discusses how to know if the business you're eyeing is a great business. A must-read! 👍
You are right, the safest way is to be an expert at determining the company's / stocks's real VALUE. That is why I pay for expert advice (and use it). Thumbs up!
here's how to really master dollar cost averaging, assuming that you can risk $500 a month and don't care where market goes 1. Invest $300 into US index funds 2. $100 into foreigen index funds 3. $100 into the one that hold US bonds no matter how the market performs , you invest $500 every month for say at least 10 years and if you do this you will always make money
That´s why you see bonds in the portfolio, to cushion those market drops. Besides, DCA will take advantage of precisly those falling markets: you buy more at lower prices, then you get better returns in the long run.
I don't think anyone suggests blindly dollar cost averaging into individual stocks. I look at it as more a description of blindly putting money into mutual funds each month or quarter. It's better than nothing and certainly better than buying all in at the high. Your approach is very interesting. I will check out some more videos.
You can make trades for $5 at many firms. I don't think that will break you. DCA is for people that don't have chunks of $10,000, $100,000, $1,000,000 but want to acquire a sizable position in a certain company/fund. So if you have $500 or $1000 a month and want to buy a certain stock, do it.
Dollar cost averaging makes sense if you use it to buy on the dips and sell some of what you own when the fund or stock has a big up day. Timing DCA based on an arbitrary metric such as the calendar is not smart. As I explain in my latest video, I effectively do DCA based on timing of the market but it's partial timing because i always keep a growing core amount invested in the fund.
Is it possible the stock in scenario #2 goes from 20, to 5, to 1, because it's bleeding a slow painful death and is about to go bankrupt or get bought out by private equity? Or is the analysis so strong that this can never happen? Sounds like timing the market to me. Eep! Kudos to anyone who follows through on this strategy and it works out. Don't think it's for me.
i consider value investing buying dips or even prices, and dca buying at any price , both are good imo but i think your right value might make more money , but saftey and hedging and cash can provide hard to explain benefits,
DCA avoid the emotional selling, which is a big part of trading and investing. You will endup with a little less but not that much. Now can you sustain the roller coaster or not will determine the method
Folks, all this video is about is not paying ANY PRICE just for the sake of taking the emotions out of investing. As I see it, he is asking you to think for yourself and establish an intrinsic value for the stock, in dollars, and never buy above it, in such a way guaranteeing your always get a good deal for you money. As Warren puts it: No business is worth an infinite amount of money, so why would you pay ANY PRICE on it, even if its just a months contribution? It s still money thrown out of the window. I know i will get hated for this but it s like buying Tesla at 1100 just because the DCA strategy tells you to!
The method proposed overexposes you on the stocks that fall, which might contradict your investment strategy. I think a better way is rebalancing the portfolio, which is very similiar.
the problem with DCA is when you start , say you started 1930 you would have done great , say you started 1927 it would have taken 23 years just to get your money back on that 3 years
True, but since I don’t have a lot of money but rather able to invest a bit monthly, I can just put it in an index fund whether it goes down or up and thus even if the market will stay the same for 20 years, since some of the years will be lower than after 20 years, you will make a profit
Come on Phil, I've read Danielle's book "Invested" which started me with value investing, which is awesome, but dismissing DCA as a gimmick that doesn't work and then proceed to describe DCA in your example of an approach that works is a bit disingenuous. Furthermore you say that DCA won't work because people will be afraid to buy when stocks are low? Then that means people who are not sticking with DCA when they should are the problem, not DCA. If your argument is that when doing DCA people don't know if there's a good story for the company, etc., well, who stops me from doing Value Investing analysis on a company and check everything looks great except the price is a little high... why wouldn't then DCA work with that stock? Sure, I give you that ONLY doing DCA while the stock price is below the intrinsic value and not when it's above, would make sense, but that's exactly what you described, a version of DCA that is improved by the context of you knowing the intrinsic value of the stock. Exactly what you described... you are a master investor, you know that it is DCA, Phil. I honestly don't see the value in dissing DCA just because is usually used in approaches that are not necessarily value investing... DCA is not the problem... doing DCA with a crappy stock IS. You of all people should know that. People that are FORCED to enter the market in chunks because they don't have huge pockets of money, have to use DCA. Who says you can't do Value Investing combined with an effective version of DCA?
No. DCA is a very specific thing. It is investing, a disciplined consistent amount of money "NO MATTER WHAT". Once you add intention... choosing to pay here, withhold here, it stops being DCA. There is no modified DCA, no almost DCA, no kinda DCA. It might be similar, but they are not the same, and produce DRASTICALLY different results.
Love this video. As of today in the KLSE market. The stock market just going down and down due to political fear reasons. However, I am confident to put my money on hold here as i know currently the constant dividend returns is at a whopping 5% to 6%. The next time if it reach another down turn by half, The dividend will reach double to almost 10% to 12%. Based on the fundamentals the company had been constantly providing dividends without failing the investor with a strong cash cow backing. Stockpiling this share as i know that this company is expanding into another new industry which will grow the company. All i need to do is to wait for the next bargain the right price to enter. In fact i am planning to double my position too :D
I thought dollar cost averaging is just buying every time it goes down , example I have few shares of MSFT at 100 each , so why invest every month regardless of price when I can just wait to be anything below what I paid. Of course if it doesn’t go down I’ll just invest money on others that are down. Am I missing something? I seen other videos say you invest every month regardless of price to dollar cost average. Sorry I’m still learning all this. :) and thanks for very informative videos Phil.
……. I thought that was dollar cost averaging, lol. I do the same thing as this. I have a day job, so it's hard for me to constantly sit at a computer to buy and sell stock. What I do, however, is have a target buy price and a target sell price, but I usually stay within the same set of 8 stocks. If a company is going on a rampage while another one is going down, I will sell some of the rampaging stock to buy the one that is hurting a bit (even though the story hasn't changed). When that rampaging stock takes a few hits, I do the same thing with my other investments. I just had to sell a few shares of a company and put them into another of my investments because of great performance. Many others are doing the same thing, because the stock took a (very) minor hit. My belief in the company has changed recently, which makes me have a higher buy price, so there could be a nice entry very soon (they are dealing with the suits in Washington right now). One thing that is a must, for me, in this strategy is to own companies with dividends. These provide constant streams of revenue. I do not use a drip system, because there are some prices that I do not want to pay for the company. Usually, companies in different segments of the investment spectrum move up and down together. Which means that the dividends could be used in sectors that are getting hurt in the current economic sphere (usually created by good ol' Washington. These almost always pass.
Well, the people have commented and not one response from the man himself which seems to conclude that DCA is not a gimmick. If you title your video “Don’t get caught in trap” and folks respond with their rebuttal, you are obligated to finish the dialogue that You started. Is there some follow up video I’m missing here.
So what your saying is basically everyone has to value invest and spend hours researching companies true value? I'm just looking for a place to invest my money over the long term without much hassle and Warren Buffet suggested index funds and dollar cost averaging which sounded good. But your telling me it's the wrong strategy. I'm really confused now.
How do you calculate your margin of safety/long-term value and the payback time? If the answer is, buy your book, I can hang with that. We all have to make a living and I'm willing to pay for good advice. I see - the 4 M's is part of my answer.
Let us be intellectually honest and admit that DCA was actually invented by Benjamin Graham in The Intelligent Investor to give defensive investors that cannot be bothered with security analysis and research a simple strategy to buy up bonds and ETF's. It is not a useful appraoch for individual stocks based on fundamental analysis because of the need to value and buy at a bargain.
Can you do a video about DCA vs DRIPs? I like drips because of my smallish (for now!) portfolio so I can avoid brokers fees. But I will definitely stock pile in the near future when the markets stop going absolutely bananas.
Dollar cost average in etf index as they less volatile,and consistent..keep cash when market is too expensive so your ready to buy when they are on sale..
Wouldn't dollar cost averaging be beneficial during the start of a recession? When we don't want to necessarily try to time the market but slowly buy stocks?
What about buying stocks in this current market? I thought buying a little by little as the prices goes down, so only buying for less than what I bought so lowering my average cost as it goes down Thanks!
dollar cost averaging when prices are going down is a strategy but make sure you only dca on fundamentally strong companies because if you do it with crappy companies, these companies can go under and you can lose your money
The whole idea of Rule #1 Investing is buying a stock low, and selling it high. Let's talk about just how powerful waiting is and why professional fund managers just can’t afford to invest like this: bit.ly/2KIMJun
DCA has its place in 401k contribs bc that is how it works. Good while market is heading south..buy low and lower...and you dont have to think. It is..automatic. So you can live your life. And company match is great if you can get it. That went bye bye as did my source of income... my job. Uh oh. Anyway, stockpiling is great and requires attention and care ...great if you know how to evaluate companies and know when they r undervalued. If you love finding an edge, stockpiling is more fun than index funds and slices of market machine-like investing. I like to do both. I am part etf indexer/finance theory, part find that edge, get those discounts, and go for gold. I think the ratio there will be the amt of time i can invest in spending on evaluating companies. I still need to learn more. With sports on hold i can do that and i just need a new source of income.
What about my current Strategy. I take from my paycheck each week, I dollar cost average into an ultra-diversified series of ETF's every week with the same amount of money. I then take lump sums out every 2 months and hunt around looking for good undervalued companies to invest in. I am Dollar Cost Averaging in, but still using the rule 1 principles and the 4 M's. I'm not trying to time the market, but still on the hunt for value. I like having rules around my own personal investments to stop emotion taking over.
@@PhilTownRule1Investing The interest rates on Cash in my home country of New Zealand is about 1% at the moment, so I basically take my paycheck and DCA into global ETF's of all shapes and sizes, largely just to try and beat inflation (3-7% growth per year and 0.5% fees VS 1% in the bank and more fee's). Us little guys have to hustle every cent, no idle cash.
does this apply to tech stocks? cuz when you look at companies like tesla, nvidia, netflix (kinda)? because those stocks go from slightly undervalued to wayy higher! and its because wallstreet is bullish and also the tech they make edges out the entire market and because of that they have no ceiling for a period of time. and sure chip companies like micron or video game companies i think this works. but tech has been the biggest growth sector in stocks in the last 2-4 years.
got any books or info about value investing? and FANNG beat the s&p so many times over last year. and even this year already has done so welll, idk if it matters
Phil is right this is what Buffett is doing,he keeps cash,coz if you dont have cash you can never buy on sale..they say dont time the market but still tyming the market coz they have cash..
You assume that you will do dollar cost averaging on a single share. How about dollar cost averaging on an ETFs following the S&P 500 REITs, Bonds, developed markets, emerging markets, and use your regular payment to rebalance at every time.
Buying shares on the way downs? is better then DCA? Still the worst strategies as compared to just stepping aside or selling at times of ELevated Risk ,and WAITING FOR THAT TO PASS, before actually buying back in at now a MUCH lower price, not buying all the way down. How do you know where the bottom is? You need a Smart Trailing approach to do this properly and the returns are so far much better then buying all the way down, and having that money tied up for months hoping and praying to recovery. It took 4 years for 2008 market to recover, it took 7 years for 2000 market to recover. Don't get trapped into a Buy, Hold & PRAY approach.
This how I have bought stocks for the last ten yrs everybody calls it dollar cost averaging it is more of a buying my favorite stocks on sale and driving down the price of my position while I accumulate more share method .....I call it the trading in reverse system
A lot of people tend to follow price momentum strategy, completely opposite to value investing. I think the price moment strategy can sometimes make quick money, but risky as well if market suddenly enter into correction mode. Value investing is in comparison boring, as you hold longer and longer, if the stock price does not go up as you like to expect, people lose patience, people start questioning themselves that perhaps they are wrong (perhaps due to they missed some key information), and exit (sometimes right before the price does go up). Patience and high conviction is key to value investing, but it is really hard to have patience and maintain high conviction.
Dollar cost averaging is not buying the stock when it's low - that's the opposite of dollar cost averaging. It's indeterminate, consistent investing at fixed time intervals to offset the volatility of the market.
Not really sure who is going to respond or if you're going too. Came across something like the "Secret", but the next steps and it helps to eliminate the fear of lose money also. it is "Success is not and Accident" by John G. Kappas.
His suggested approach is based on the assumption that one’s valuation is always correct. There are many stocks which are valuation traps or look expensive because of wrong valuation approach. Using DCA on an index fund means we admit we don’t know enough about the actual value of the stock but believe the stock market should go up in the long run. I believe in this assumption more than the one he suggested - we can know exactly how much the stock is worth at all times and the value is not affected by our emotions.
this guy will hurt the financial wealth of his listeners
The way I see it, stocks (or index funds) go up on average. So if I DCA in, I’m basically trying to time the market. That, on average, is a bad approach. DCA delays the earnings. I think DCA is not a good idea on average, other than to play psychological games.
Yeah exactly, DCA still has alot of advantages to it.
@@cybercab What? DCA removes emotions from investing.
100%
Dollar cost averaging is used by working people to slowly invest in index funds and mutual funds usually in 401K and IRA`s.
I came for Dollar cost averaging advice, and I left confused. Thanks Uncle
I understood it simply. Buy a business only when it's cheap, not when it's both cheap AND expensive. Doing it this way dramatically increases your returns.
It's completely outlandish to say dollar cost averaging equates price to value. DCA was favourite practice of Benjamin Graham, the founder of modern value investing. Assuming the value of a stock stays the same, you get more value for each dollar you invest as the price falls. This does not sound like equating price to value.
Phil, you are giving wonderful advices, but you didn’t get this one right.
First, I would point out two fallacies in your argument, then I will show you what dollar coat averaging is good for.
The to fallacies are the followings. In your first example, you deliberately fabricated your scenario to fit to your argument, and also assumes that the value of the company stays at $20. But what if it is a wonderful company, growing and growing. You would miss Apple from the beginning, and many other good companies with great returns. You can wait for a dip, but the opportunity cost that you misses is greater than what you win on the dip in the price. Graham shows it to you in his book.
The second issue is in your last example, when you assume a flat market. But in the reality, it is hard to show any 10 years period when the market is flat. It is growing continuously in long term, as the economy is growing.
What DCA is really good for? S&P500, or DJIA has a long term return of like 5-7% above inflation (I’m not sure about the exact number). This is way above the return of a risk-less investment in Treasury. You put x% of your paycheck into an ETF, and you have a virtually risk-less investment with higher return than in the Bond market, without any effort or knowledge in economy and finance. Good for most of us. Professionals can do better, and I believe that’s what you tried to explain, but that is misleading without explaining the whole pictures, the pros and not just the cons.
And how professionals use DCA? Two ways, complementing each other.You know your favorite company has a great price, but you don’t know where the bottom is. So you DCA all the way while it is below value, and stop when it is above. From the other perspective. You DCA a constant 10% of your money, but always into whatever is the cheapest at that time. And you avoid keeping too much money in cash, and missing the bull market.
The later might have been a great strategy in 2017, when the market was already overpriced, and a professional might wanted to go into cash to profit from the upcoming recession. But the market just kept rising all along, and maybe the recession won’t even push back the price to below2017 level anymore.
So I say do DCA if you want to match the market without effort, which is already greater profit than most people do. And mix the concept of DCA with your strategy for greater return with greater effort.
Zoltán Juhász
Interest rates need to be normalized to the 4-4.50% range. Only then can you can clarity of the investment landscape. With rates so low, people have plowed their capital into stocks, often times doing so foolishly.
Roky Erickson rocks Interest rates will never normalize. The economy is an endless oscillation between bull and bear markets, so interest rate is also always changing.
Also there is no ideal interest rate. The ideal is always different, as other properties of the economy is changing.
This is actual high quality advice. I salute you sir. DCA works perfectly fine for passive investments like monthly ETF savings plans. You can buy MSCI World / S&P 500 ETF shares passively through many brokers without any transaction fees. Over a long enough period (10-20 years including bull and bear periods) you will get the exact long term return % of the index.
You can split your monthly investments into a passive and active component, so you have a completely risk-free (because if the index would never bounce back, the whole financial system and world economy would have to collapse and then all your other non-invested money wouldn't be worth shit either) and also completely effortless index level return and you can pursue a value investment strategy like Phil preaches. Just look for relatively undervalued companies with good growth potential and DCA between margin of safety price and actual value. This way you can mix some growth investment strategy in there as well and you don't have to wait till you sit in cash and go all in.
It is VERY IMPORTANT to start AS EARLY AS POSSIBLE and pump as much money AS HARD AS POSSIBLE into your investments to exploit compounding.
And when you've compounded enough shift some of your wealth into something like a dividend aristocrat stock, quit your high income job, sit in your Porsche and enjoy massive cash flow from your dividends supporting your decadent unemployed lifestyle.
This is why 401Ks work so well for the average Joe. DCA is for people who don't have chunks of $10,000, 100,000 or 1,000,000 to plop down, and with firms offering $5/7 dollar trades, it's very economical to do. You can invest $500 or $1,000 a month as an Apple or Amazon keeps rising. Face it, when you save all year and have 10K to invest, your mind plays tricks and you might not pull the trigger.
Well put Zoltan. This video seems more suitable for experienced investors, however it is not practical to say " there are many business' on sale out there". If it was easy to know what companies were on sale, then they would never go on sale. I have been experimenting with Value Added Averaging in my retirement account, and would love for some feedback on if anyone else is investing with VAA.
Would it be possible to make an introductory video on how to evaluate companies and the real value of a company and its stocks price. I am learning from your videos great deal and I do appreciate the work and efforts that were put in creating your outstanding channel. Thank you!
Yes!
Aaand silence. I bet he just wants you to buy his books and courses...
@@RemcoAlexanderPhD This comment was made 2 years ago... he has since recorded the requested video tutorial. I hope you research your companies better than this...
@@mbrasseau he also has been podcasting for several years wherein he taught his daughter to do just that.
buy the books, they are worth the price. you won't regret buying them.
That's going to be alot of sitting on the sideline waiting for price to go down
Exactly 😂
I subscribe to Phil's podcast which is really great. Some really great advice for retail investors. I would just add two points or more of a question for this particular video":
1. It is true that DCA is not working as well as buying at discount or going all in at once. Many studies have shown that. However, the majority of retail investors have no choice but to DCA. In our 401k's we invest as we get paid. In our brokerage accounts, the same thing. We can invest periodicaly only when we get paid. We don't have huge piles of money to go all in when prices are cheap. Yes, we can save up and not invest until we accumulate certain sum, but that is also a form of DCA, just out of the market. Not to mention we would be out of the market while we are accumulating cash, missing all kinds of opportunities and loosing to inflation.
2. The second point is that unless we are in a total market crash, it is very hard to find great companies cheap. Especially as cheap as you mention in your video. How can a retail investor find great company cheap before everyone else does, especially big money and institutions? How come no one else is buying this stock this cheap? Am I the only one who stumbled upon a golden egg that no one knows about? Why is this great company this cheap in the first place and we are not in the crash?
That´s why stock picking doesn´t work in the long run. This guy is making money selling strategies, not implementing them. Open your eyes.
I think Phil tends to exaggerate how cheap a stock should be, because he knows we're going to break that rule anyway. Instead of buying at 50% off, for example, we might get tempted and buy at only 25% off. Whenever he gives hypotheticals I just tune out the numbers and listen for the underlying strategy.
VIP talk
Yes, that’s right. DCA is popular because the average retail investor simply cannot pick out, never mind actually buy, the low priced good companies. DCA gets them into equities at a decent price, but not the very best price.
why would you bother, DCA'ing into an index fund is going to beat most active managers - including this guy probably - 95% of the time.
Warren Buffet famously bet $1m vs the best hedge fund managers that over a 10 year period they couldn't beat an index fund... he was right... google it.
Big Investing operations have rules on which stocks they can invest in. One of those rules is that they can only invest in stocks with a certain market cap and float, otherwise their massive trades will affect the stock price to an excessive degree. Peter Lynch has written much about the advantages that dedicated retail investors have over larger institutions on Wall Street and elsewhere.
This is the ultimate essence of value investing. I don't understand why people don't get this strategy!!!
Hard to believe a $10 stock could go to $20 in six months, then to $5, then to $1and _not_ have a significant change in fundamentals.
Exactly. not realistic
Not that drastically, but many stocks went down 50-70% in 2008 without change in fundamentals.
do the homework then you will know...
J Fitzpatrick
Back to school
What a difference 9 months make lol
Unlike the other people here, I learned from my years as an individual saver to not use DCA for buying silver as a form of savings. Fortunately, I got in when silver was $6-7 per oz. What I did was buying silver as much as I could afford in the early years, and as the price got higher, I would stop buying or not buy nearly as much as before. When I sold out, I still made double what I put into it.
Instead of using DCA... Let's say that you had $10k to work with for 5 years ($166.66 per month regardless of price). What I did was, if the price was lower, I bought as much as I could afford. When the price was higher later, I bought very little at the most, if at all. When the price dropped again, I would use the money I should have used (for DCA), but saved instead, in the previous months or year or so and then went all in with that money saved at a lower price. At the end of 1, 2, 3, 4, or 5 years, I would have ended up investing the same amount planned for the time period into a larger number of oz of silver. When I had to sell out, I ended up with twice my savings. I could have made more, but the market was moving so much that it was difficult without doing the work needed to judge where the exit point was really at. I just had a pretty low entry point. I still made far more money than a person with my low level of knowledge would ever get from a savings or CD account at brick-and-mortar banks, period.
you did well.
Awesome! I got MNK at 2.50. Then purchased more at 1.70. Then I purchased more at 1.05! Cost basis is at 1.26. Now is around 3.50!. Returns 130%!!!! In 3 months!
course I am not selling it. I found the Intrinsic value of the company and margin of safety! Big gains ahead 💪
New subscriber here. And a new investor (as of March 17). I’ve learned a lot from these millennial stock advisors on UA-cam, but I do not have the same timeline as they, since I’m a 65-year-old retired teacher/baby boomer. Thank you very much for all the information I’ve discovered on your channel! You have offered a wealth of information and I am so appreciative. My little portfolio has increased by $1900 since I played around with the cruise stocks and invested about $5000. More diversified now but it’s still cruise ship heavy. Trying to educate myself for future moves that might not turn out quite so lucky.
Looking forward to learning for more of your video collection. You’re a great teacher!
I can agree what what he says about DCA when it comes to individual companies but not when it comes down to index funds. At the end of the day you can’t re invent the wheel if you read the books the Warren Buffet based his investment knowledge on they say to DCA even Warren Buffet says to DCA index funds so it’s good for some things but bad for others.
Yeah DCA individual stocks is dumb. But DCA index ETFS is fine
Soljarag5 please explain why its fine DCAing index ETFS & not individual stocks
naught na, sure I'll give you an example.... I bought the stock MDR... And it started to go down... So I bought more, continued to go down.... A month later they went Bankrupt...... ETFs have tons of stocks, if 1 goes bankrupt, the ETF wont go to 0
@@Soljarag5 That's why it's inportant to research the company you're buying in, it becomes a gambling putting your money in company without doing the research.
Jee Vang, care to explain why you think it doesn't make sense? Or are you just going to make empty comments
@@Soljarag5 that's why you have to research before you fully commit to the company. I only average up or down my long term holds
Wow Phil, this was awesome. Thanks for bringing the hammer down on DCA. I realize what you are discussing is Value Averaging and that is the way to go. Gotta know your company. Love the way you pooh-poohed the advisors and market strategists with their efficiency crap. It's now May 4, 2020, and anyone who took your advice seriously is probably looking real good.
DCA might be bad for individual stocks, but what about ETF's/index funds?
You will loose a ton of money being out of the market to inflation. Being in money market account and other short term cash investments the yields are to low. Where do you park your cash?
Honestly I find smart DCA on short term trades is perfect. I’ve had ridiculous algorithms trying to chase the market and it’s always late trend trading. However reversal trading is often early....but not if you use DCA just add to the position and keep your average tight to the price. Often it it is a reversal and if it’s not there is a pullback shortly after going into the new trend.
Phil.. really wonderful, but what to wait for? Whether market down or stock down for pailling up? And also how to arrive at pay back time?
He is completely right because dollar cost averaging doesn't give you optimal results when you compare it with the compound rate of return with even a fixed price of a share.
So, DCA is the same as DRIP? According to what you are saying, instead of letting it DRIP, we should take the dividend in cash and buy other tasty stocks with that money?
If you pay attention to the Intelligent Investor, DCA seems to contradict one of Graham's principles: paying too high of a price for a stock. From what I got reading the book was to DCA into companies that are bargains and fundamentally sound. But, when Mr. Market is asking you to buy for a higher price it no longer makes sense to keep buying. Rather, if you are an enterprising investor and seek better returns, put your extra capital into bargains deals and stockpile those until they run their course. In One Up On Wall Street, Peter Lynch says that your portfolio can be filled with as many stocks as you need, assuming they are making you money and are profitable long term. The example that I saw regarding apple "If you don't DCA into Apple then you'll miss out on huge opportunities." While this is true the argument offers a flaw. Nobody knew back in the 80s and 90s that apple would make smartphones and dominate the game. At the time of early investment, this was just like every other tech company just trying to make out of a garage just like many cryptocurrencies do today.
my most stock is sono motors, I learn and understood this from reading rule #1, and I finally get when they say there is blood in the streets, I thinks it when most of the stocks turn from green to red
Dca on individual stocks is lethal , I always dca monthly in index funds voo etf .
investing in etf s is more lethal long term you will average -2% when you take inflation into account
Steven Upton., you have no clue what you're talking about
oh you sell them lol
@@stevenupton7825 huh?
only someone profiting from selling ETF s would say something that stupid , everybody knows by the time you ve paid management fees and they ve overtraded , bought high and sold low rebalancing the average ETF loses 2%
"Understanding your business" is not easy. But a close watch on your stocks may NOT be speculative? So I should not ever consider dollar cost averaging
? No more automatic monthly contributions toward stocks? What's the game plan?
Is it good to dollar cost average on good companies like apple, google, broadcom, tesla etc
DCA is a powerful trading tool if you know how to use it properly. I trade stocks without stop loss (obviously i do my own research on the company and don't just jump in based on UA-cam videos) and DCA is how i get out either profitable or break even.
Ben Graham actually agrees to Dollar cost averaging in principle, see chapter 5 - page 118 - the intelligent investor (last paragraph)
If your not willing to put in the work to do the valuation it's the safest best way.... Just like if your not willing to investigate individual companies then buying an index or mutual fund is safest.
From what I understand DCA can be used while invested in S&P. It would be a smart way for the average man to invest without having to stare at charts every waking minute of his life.
I use DCA method because I'm a lazy investor. I also use 3 fund portfolio. Just set auto invest per month and forget it for the next 20-30 years.
Great explanation. Thank you for making this video!
Started DCA early 2020. I was convinced the market would crash, so I would have never ever invested a fixed value. Sold with 30% gain. Yeah of course in hindsight I could have made better going all in. But given my evaluation at that time I wouldn't have invested anything at all.
Thanks for this info. Really helpful. I’ve been thinking about DCA investing but also taking an online course on value investing. Makes sense but wondering how hard it is to find these companies. And what about index funds and ETF?
The last major down turn was 2008. Putting your money into cash you would be losing approximately 20% to inflation. Where do you park your cash to keep up with inflation?
Michael Hunziker From what Ive learned one option would have been to be in the bond market. Interest rates were between 4 and 5 percent at the time then dropped to 2 percent during 2009 if I'm not mistaken. Then sell your bonds off at a premium and get back into the stock market when things were selling at a discount. (Thats assuming you saw the crash coming).
Michael Hunziker I think you mostly want to be in the stock market finding companies that are undervalued or in an index fund if you don't want to do much maintenance. I hear real estate can be a pretty good place too if you have the cash to get into it.
Michael Hunziker Phil does a lot of good bite size pieces and he's got a podcast by the name of invested. Another really good resource for info is a site called the investors podcast go to the podcast section and listen from episode one.
Michael Hunziker hope this helps, good luck.
inflation isn't 20% a year, nobody would hold cash from 2008-current
Is it the same if you're investing in an Index fund?
Some of the best advice I have ever received. The writing was always on the wall, but I never read it before !
Thank you !!
How do you calculate the “Conservative Value Per Share?”
some ways are the discounted cash flow model or price to book ratio
Read his book *Rule #1*. He's written there in detail about how to value a piece (share) of a business. Also, he discusses how to know if the business you're eyeing is a great business.
A must-read! 👍
You are right, the safest way is to be an expert at determining the company's / stocks's real VALUE. That is why I pay for expert advice (and use it). Thumbs up!
Today the 8th day of September 2021. The advises are just as timely as it was in 2017. Great video.
here's how to really master dollar cost averaging, assuming that you can risk $500 a month and don't care where market goes
1. Invest $300 into US index funds
2. $100 into foreigen index funds
3. $100 into the one that hold US bonds
no matter how the market performs , you invest $500 every month for say at least 10 years and if you do this you will always make money
And there is a FED who always bail you out :D!
So if the market goes down for 10 years like it did from 2000 to 2009, what money exactly do you make in that period?
That´s why you see bonds in the portfolio, to cushion those market drops. Besides, DCA will take advantage of precisly those falling markets: you buy more at lower prices, then you get better returns in the long run.
Graham's lesson. Best one.
I don't think anyone suggests blindly dollar cost averaging into individual stocks. I look at it as more a description of blindly putting money into mutual funds each month or quarter. It's better than nothing and certainly better than buying all in at the high. Your approach is very interesting. I will check out some more videos.
Totally agree. Not to mention the brokerage fees that will be much higher if you buy in bits and can take away your profit!
You can make trades for $5 at many firms. I don't think that will break you. DCA is for people that don't have chunks of $10,000, $100,000, $1,000,000 but want to acquire a sizable position in a certain company/fund. So if you have $500 or $1000 a month and want to buy a certain stock, do it.
First trade does not charge for trades! Look into that
Dollar cost averaging makes sense if you use it to buy on the dips and sell some of what you own when the fund or stock has a big up day. Timing DCA based on an arbitrary metric such as the calendar is not smart. As I explain in my latest video, I effectively do DCA based on timing of the market but it's partial timing because i always keep a growing core amount invested in the fund.
Is it possible the stock in scenario #2 goes from 20, to 5, to 1, because it's bleeding a slow painful death and is about to go bankrupt or get bought out by private equity?
Or is the analysis so strong that this can never happen? Sounds like timing the market to me. Eep! Kudos to anyone who follows through on this strategy and it works out. Don't think it's for me.
Great video. Maybe I'm missing something but how do you figure out payback time?
Where can I buy your book, something on sale and with a good margin of safety.
How about i DCA an index ETF? I mean an index can't go bankrupt right?
i consider value investing buying dips or even prices, and dca buying at any price , both are good imo but i think your right value might make more money , but saftey and hedging and cash can provide hard to explain benefits,
For the payback time, do you only need to own shares of the company or do you need to own the company itself? I'm a beginner in this :>
February 2021, sitting in cash, looking into CNI and a few more energy utilities to get payback time.
DCA avoid the emotional selling, which is a big part of trading and investing.
You will endup with a little less but not that much.
Now can you sustain the roller coaster or not will determine the method
finally someone knows what hes talking about
Folks, all this video is about is not paying ANY PRICE just for the sake of taking the emotions out of investing. As I see it, he is asking you to think for yourself and establish an intrinsic value for the stock, in dollars, and never buy above it, in such a way guaranteeing your always get a good deal for you money. As Warren puts it: No business is worth an infinite amount of money, so why would you pay ANY PRICE on it, even if its just a months contribution? It s still money thrown out of the window. I know i will get hated for this but it s like buying Tesla at 1100 just because the DCA strategy tells you to!
The method proposed overexposes you on the stocks that fall, which might contradict your investment strategy.
I think a better way is rebalancing the portfolio, which is very similiar.
the problem with DCA is when you start , say you started 1930 you would have done great , say you started 1927 it would have taken 23 years just to get your money back on that 3 years
incorrect with dividends reinvested you would've made a decent amount of money.
True, but since I don’t have a lot of money but rather able to invest a bit monthly, I can just put it in an index fund whether it goes down or up and thus even if the market will stay the same for 20 years, since some of the years will be lower than after 20 years, you will make a profit
Come on Phil, I've read Danielle's book "Invested" which started me with value investing, which is awesome, but dismissing DCA as a gimmick that doesn't work and then proceed to describe DCA in your example of an approach that works is a bit disingenuous. Furthermore you say that DCA won't work because people will be afraid to buy when stocks are low? Then that means people who are not sticking with DCA when they should are the problem, not DCA. If your argument is that when doing DCA people don't know if there's a good story for the company, etc., well, who stops me from doing Value Investing analysis on a company and check everything looks great except the price is a little high... why wouldn't then DCA work with that stock? Sure, I give you that ONLY doing DCA while the stock price is below the intrinsic value and not when it's above, would make sense, but that's exactly what you described, a version of DCA that is improved by the context of you knowing the intrinsic value of the stock. Exactly what you described... you are a master investor, you know that it is DCA, Phil. I honestly don't see the value in dissing DCA just because is usually used in approaches that are not necessarily value investing... DCA is not the problem... doing DCA with a crappy stock IS. You of all people should know that. People that are FORCED to enter the market in chunks because they don't have huge pockets of money, have to use DCA. Who says you can't do Value Investing combined with an effective version of DCA?
No. DCA is a very specific thing. It is investing, a disciplined consistent amount of money "NO MATTER WHAT". Once you add intention... choosing to pay here, withhold here, it stops being DCA. There is no modified DCA, no almost DCA, no kinda DCA. It might be similar, but they are not the same, and produce DRASTICALLY different results.
Love this video. As of today in the KLSE market. The stock market just going down and down due to political fear reasons. However, I am confident to put my money on hold here as i know currently the constant dividend returns is at a whopping 5% to 6%. The next time if it reach another down turn by half, The dividend will reach double to almost 10% to 12%. Based on the fundamentals the company had been constantly providing dividends without failing the investor with a strong cash cow backing. Stockpiling this share as i know that this company is expanding into another new industry which will grow the company. All i need to do is to wait for the next bargain the right price to enter. In fact i am planning to double my position too :D
I thought dollar cost averaging is just buying every time it goes down , example I have few shares of MSFT at 100 each , so why invest every month regardless of price when I can just wait to be anything below what I paid. Of course if it doesn’t go down I’ll just invest money on others that are down. Am I missing something? I seen other videos say you invest every month regardless of price to dollar cost average. Sorry I’m still learning all this. :) and thanks for very informative videos Phil.
……. I thought that was dollar cost averaging, lol. I do the same thing as this. I have a day job, so it's hard for me to constantly sit at a computer to buy and sell stock. What I do, however, is have a target buy price and a target sell price, but I usually stay within the same set of 8 stocks. If a company is going on a rampage while another one is going down, I will sell some of the rampaging stock to buy the one that is hurting a bit (even though the story hasn't changed). When that rampaging stock takes a few hits, I do the same thing with my other investments.
I just had to sell a few shares of a company and put them into another of my investments because of great performance. Many others are doing the same thing, because the stock took a (very) minor hit. My belief in the company has changed recently, which makes me have a higher buy price, so there could be a nice entry very soon (they are dealing with the suits in Washington right now).
One thing that is a must, for me, in this strategy is to own companies with dividends. These provide constant streams of revenue. I do not use a drip system, because there are some prices that I do not want to pay for the company. Usually, companies in different segments of the investment spectrum move up and down together. Which means that the dividends could be used in sectors that are getting hurt in the current economic sphere (usually created by good ol' Washington. These almost always pass.
Well, the people have commented and not one response from the man himself which seems to conclude that DCA is not a gimmick. If you title your video “Don’t get caught in trap” and folks respond with their rebuttal, you are obligated to finish the dialogue that You started. Is there some follow up video I’m missing here.
So what your saying is basically everyone has to value invest and spend hours researching companies true value? I'm just looking for a place to invest my money over the long term without much hassle and Warren Buffet suggested index funds and dollar cost averaging which sounded good. But your telling me it's the wrong strategy. I'm really confused now.
How do you calculate your margin of safety/long-term value and the payback time? If the answer is, buy your book, I can hang with that. We all have to make a living and I'm willing to pay for good advice. I see - the 4 M's is part of my answer.
Is payback time the same as investment horizon? If so, how do you calculate it?
It all looks fine and dandy, but how in the world am I supposed to identify those incredible companies? :(
and at what price is good!?
start reading about fundamental analysis
Google.
Have you read Rule 1 investing? All that is speaking about in all this videos is right there.
read or listen to his book rule 1 investing. you can listen to it for free on audible if you sign up for a free trial
great lessons. thank you so much.
Let us be intellectually honest and admit that DCA was actually invented by Benjamin Graham in The Intelligent Investor to give defensive investors that cannot be bothered with security analysis and research a simple strategy to buy up bonds and ETF's. It is not a useful appraoch for individual stocks based on fundamental analysis because of the need to value and buy at a bargain.
Thanks Phil, still looks like long term DCA, but with some common sense. Just sell 50% at new ATH's and invest again in same business....right?
Eye opening message Phil thanks!! Dollar cost averaging is for people who dont know what they are doing and need extra protection.
Nice theory, those economic storms happened 2008 and that's it ... Todays market is driven b lot of dumb money also, it''s a wild west
Can you do a video about DCA vs DRIPs? I like drips because of my smallish (for now!) portfolio so I can avoid brokers fees.
But I will definitely stock pile in the near future when the markets stop going absolutely bananas.
Dollar cost average in etf index as they less volatile,and consistent..keep cash when market is too expensive so your ready to buy when they are on sale..
What is the 4M rule?
Wouldn't dollar cost averaging be beneficial during the start of a recession? When we don't want to necessarily try to time the market but slowly buy stocks?
It doesn' matter - don't try to time to market.
Also, what about all those transaction fees
What about buying stocks in this current market? I thought buying a little by little as the prices goes down, so only buying for less than what I bought so lowering my average cost as it goes down
Thanks!
dollar cost averaging when prices are going down is a strategy but make sure you only dca on fundamentally strong companies because if you do it with crappy companies, these companies can go under and you can lose your money
Great video!
Do you have any videos on tips on how to pick a good business to invest in?
compare the financial ratios of the company you are looking at with its competitors in the same industry and sector
Is waiting to find value, same as trying to time the market?
The whole idea of Rule #1 Investing is buying a stock low, and selling it high. Let's talk about just how powerful waiting is and why professional fund managers just can’t afford to invest like this: bit.ly/2KIMJun
DCA has its place in 401k contribs bc that is how it works. Good while market is heading south..buy low and lower...and you dont have to think. It is..automatic. So you can live your life. And company match is great if you can get it. That went bye bye as did my source of income... my job. Uh oh. Anyway, stockpiling is great and requires attention and care ...great if you know how to evaluate companies and know when they r undervalued. If you love finding an edge, stockpiling is more fun than index funds and slices of market machine-like investing. I like to do both. I am part etf indexer/finance theory, part find that edge, get those discounts, and go for gold. I think the ratio there will be the amt of time i can invest in spending on evaluating companies. I still need to learn more. With sports on hold i can do that and i just need a new source of income.
What about my current Strategy. I take from my paycheck each week, I dollar cost average into an ultra-diversified series of ETF's every week with the same amount of money. I then take lump sums out every 2 months and hunt around looking for good undervalued companies to invest in.
I am Dollar Cost Averaging in, but still using the rule 1 principles and the 4 M's. I'm not trying to time the market, but still on the hunt for value. I like having rules around my own personal investments to stop emotion taking over.
Hey, if it's working for you then why not!
@@PhilTownRule1Investing The interest rates on Cash in my home country of New Zealand is about 1% at the moment, so I basically take my paycheck and DCA into global ETF's of all shapes and sizes, largely just to try and beat inflation (3-7% growth per year and 0.5% fees VS 1% in the bank and more fee's). Us little guys have to hustle every cent, no idle cash.
What are the four m’s
How to calculate the years of return? Don't get it
Great chap, Phil is one of of the very greatest to follow for great lessons
does this apply to tech stocks? cuz when you look at companies like tesla, nvidia, netflix (kinda)? because those stocks go from slightly undervalued to wayy higher! and its because wallstreet is bullish and also the tech they make edges out the entire market and because of that they have no ceiling for a period of time. and sure chip companies like micron or video game companies i think this works. but tech has been the biggest growth sector in stocks in the last 2-4 years.
Haris Bokhari
Tech is momentum investing, the perverted cousin of value investing.
got any books or info about value investing? and FANNG beat the s&p so many times over last year. and even this year already has done so welll, idk if it matters
Phil is right this is what Buffett is doing,he keeps cash,coz if you dont have cash you can never buy on sale..they say dont time the market but still tyming the market coz they have cash..
You assume that you will do dollar cost averaging on a single share. How about dollar cost averaging on an ETFs following the S&P 500 REITs, Bonds, developed markets, emerging markets, and use your regular payment to rebalance at every time.
Buying shares on the way downs? is better then DCA? Still the worst strategies as compared to just stepping aside or selling at times of ELevated Risk ,and WAITING FOR THAT TO PASS, before actually buying back in at now a MUCH lower price, not buying all the way down. How do you know where the bottom is? You need a Smart Trailing approach to do this properly and the returns are so far much better then buying all the way down, and having that money tied up for months hoping and praying to recovery. It took 4 years for 2008 market to recover, it took 7 years for 2000 market to recover. Don't get trapped into a Buy, Hold & PRAY approach.
DCA only works if the stock eventually goes up.
If it goes down you're screwed.
definitely. i think the second essential part for dca but often overlooked, is to dca only on fundamentally strong companies
This how I have bought stocks for the last ten yrs everybody calls it dollar cost averaging it is more of a buying my favorite stocks on sale and driving down the price of my position while I accumulate more share method .....I call it the trading in reverse system
Start investing small amount in index fund every month. Set up auto payments. Forget for 15 years.
Phil is suggesting dollar cost averaging as share price goes down, but NOT to dollar cost averaging if share price goes up.
A lot of people tend to follow price momentum strategy, completely opposite to value investing. I think the price moment strategy can sometimes make quick money, but risky as well if market suddenly enter into correction mode. Value investing is in comparison boring, as you hold longer and longer, if the stock price does not go up as you like to expect, people lose patience, people start questioning themselves that perhaps they are wrong (perhaps due to they missed some key information), and exit (sometimes right before the price does go up). Patience and high conviction is key to value investing, but it is really hard to have patience and maintain high conviction.
Maybe DCA on Index funds?
Dollar cost averaging is not buying the stock when it's low - that's the opposite of dollar cost averaging. It's indeterminate, consistent investing at fixed time intervals to offset the volatility of the market.
i do understand that second point tho , price drop after buy lets you buy moaaar cheaper , big change
Do weighted average dollar cost average..
Tell me what’s going down, I’ll follow your strategy.
Not really sure who is going to respond or if you're going too. Came across something like the "Secret", but the next steps and it helps to eliminate the fear of lose money also. it is "Success is not and Accident" by John G. Kappas.
The Secret is bullshit. I can't read the Kappas book, but these magical hypnotic mental tricks don't sound to good to me.
That was great, thank you. Nice execution.
Holly Christmas 😎😎😎😎
The concept can be good but the examples are not. If a stock falls 50% in 6 months, probably I won't investing
Interesting point