Dollar Cost Averaging Explained (but with a much improved performance)
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- Опубліковано 23 лип 2022
- Dollar cost averaging is a common approach to investing, where many people invest into something on a monthly basis, thereby getting an average overall price.
I too use dollar cost averaging on the indexes but with a more efficient approach that achieves a higher annualised return and has less drawdown.
I use it in combination with my singular stock trading strategy, which when combined, creates a highly effective wealth building approach.
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This is the video i needed - thank you! no flashy watches, cars, banks of screens, babes, you on a learjet etc
You have some of the best advice about investing on youtube that is easy to understand and well researched, I've been trying to find good advice on how to average up on a stock with profit, but haven't found any good video on this subject. If you think your community would like to know more and your able to help its a video that could help your channel I haven't seen any good video on this idea.
Thanks for the great teaching and sharing! You have introduced a few strategies like a) dual monthly + weekly macd for relatively stable stock like BRK, b) dual weekly + daily macd for volatile asset like bitcoin, c) weekly macd strategy for FANG stock, d) weekly macd + 20W MA strategy for general stock, e) monthly macd + RSI for gold. If possible, love to see in future videos on the pros and cons of these different strategies and which one is more suitable for index ETF (like SPY, QQQ) investing. Many thanks.
Thanks CCbill. Noted
Excellent explanation as always👍
Thanks Noel
Excellent . If index fund works (conversation with the great soul of Mr. Bogle is free) , this is even better. What is very appealing is that this chanel with so much materiel and presentation of different strategies about trading does not miss this totally different approach for investment. Big thank, your work is very appreciated.👍👍👍
Thanks Mehrdad 🙏
This is simply top shelf. GREAT video!
Thank you kindly!
@@FinancialWisdomhow about if i bought 10k worth of amc stocks.now that 10k is worth arround 1k now.almost 98% down.will it help if i DCA?
One of the best videos I've ever seen. I use QLD to buy when market crashes. However, I use a formula of roughly 45% QLD, 45% SCHD and 10% bonds. I then rebalance yearly to "lock in" profits from the leveraged position. I actually do have small positions in LABU and SOXL also, that i've been buying last few weeks and plan to hold these till they get back sky high.
QLD in my opinion is the best form of leverage and much easier to manage than LEAPS
great content, always love your videos...
Thanks Amit
Great vid as always, thanks
Thanks Jeremy
Thanks- great video - as always!
Thanks Adam
I've always expected to be seeing values here, and you keep proving me right.
Thanks Fidelis 🙏
Thanks Gareth. Very sound as always. (The Russell 2000 ETF (IWM) looks quite attractive...)
Thanks William, It does....👍
Always great videos. I'm binge watching them all and it's fascinating how you can digest everything so easily. Thanks for that. I'm having trouble understanding your gentle x2 leverage. Which mechanism are you using? Dipping into your margin account and buying x2 the cash you're holding? Cheers
I was wondering the same
Great video. ❤❤❤❤❤
Shaboom! If you heard that it was the sound of my jaw hitting the floor in shock.
This was an amazing video. My goodness I have missed out on so many investment opportunities.
WOW!
Thanks Donnie🙏
you still can apply breakout strategy to the indices with less amount.
Hey there,
I'm just following my derivative of this method, just buying US and European sector + Japan, Asia, Emerging Markets ETF only when they are below 200d SMA [at the end of the month], and the more significant divergence from the moving average, the more I buy and the more money I put in an ETF.
One of my favorite videos! When you talk about leverage, could I use a leveraged fund such as TQQQ for a longer term buy or is this instrument only good for shorter term gains?
I think so
Nice video..btw i made my first killing by dollar cost averaging in diversified funds only..it surely works.. Only thing i started adding a bit early with a 10% fall only..☹️.
One thing i wanted to ask is do you consider nasdaq or faang or any particular sectoral etfs/funds as diversified?
I think it's fine to do this with individual stocks provided that you combine with fundamental analysis of the stock that is well established and have high confidence in its future, and exit the position should the fundamentals deteriorate.
I don't disagree if you have made enough research to gain the conviction you need to stay the duration. The only downfall is the time factor it could take for those individual fundamentals to materialise.
I've been figuring out how I like to invest and trade and I like your rules a lot. I also like not focusing on any stocks that I might fall in love with because it gets in the way for when I need to cut a losing position and I end up dithering because I believe in the stock. Much better for me to be utterly mechanical in my trading.
If you have twenty equally weighted individual stocks the most you can lose is 5%. Also stay away from new unestablished companies like Voyager lol.
@@FinancialWisdom So true. Even Mega Caps and Blue Chips can stay mired in the swamp for a long, long time.
I would assume Jeremy mever exited his position
Have you ever looked into Robert Lichello's AIM books from the 70s? It's a buy-low/sell-high approach that some think is better than DCA.
Very well put together as usual! :)
As per your Warren Buffet quotation where he said ''if you enjoy spending 8hrs a week on investing then do it!!'' Well I do enjoy it very much (don't like crosswords) and as an old, late starting, fellow your otherwise invaluable presentation and strategy is of no use to me! :)
Strangely, having said that, I enjoy seeing what I should perhaps have done 40-50yrs ago. Thankfully, and effectively, up to a point, my company pension did so! :)
Where were you and the WWW fifty years ago, eh?
Key Pup the good work.
NioAxe
LOL thanks Noacks. Its not too late!..... Now is a great time to average into some of the Indexes.😉 If they drop further average in again..
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Just joined!! Trying to figure out scanners and stuff great content keep it up!!!
At 3.35 you said that an option would be to use a moving average. Which MA would you suggest? By the way I love your work and have recently joined your group. :)
Maybe 100 SMA or 200 SMA would work..mostly the 200 one.
Thank you! :)
You're welcome!
Great video!
What are you doing with your money that you would normally be DCA with while you wait for the 25% pull backs . They don't happen very often.
I trade individual stocks through consolidation breakouts
I like to trade breakouts as well because you can set your stop fairly close for low risk and when a breakout happens you make massive gains. Doing it with call options is even more fun but can be much more risky.
Great video and spot on content
Glad you enjoyed it
How do you allocate your funds for this method? If i got $1000 for investing each month. Would i DCA 100% off it until the market drops and switch method? Or would i DCA 50% and save 50% for this other method?
That's all very well - trading individual stocks while waiting for the index 25% pullbacks. But what do you use for cash to buy the dip on the index - if all your money is locked up in individual stocks which, presumably fall along with the index? Just 'be lucky'?
My strategy exits stocks in a decline due to the moving average, therefore i'm mostly cash during a major decline.
Index funds are a crowded trade. It seems that ship has sailed already.
There are few individual stocks in the S&P500 that are fairly valued while the rest are wild.
It seems every currency is being debased and that is why everything keeps going up from Pokémon cards to stocks
I'm not sure if I understand it correctly. On the example at 3:00, you invest at the start of 2016 then again in late 2018. That's a period of almost 3 years where the index is rising and you're not putting any money in - how is this a better strategy? It would be more clear with a worked example to compare the two approaches e.g. how much you're investing at each of the two dips vs how much as a regular monthly amount. It looks like with this "timing the market" approach you're losing out on a lot of growth and compounding.
Awesome video! With regards to using leverage... how do you feel about using 2x and 3x leveraged etfs? Obviously the drawdowns can be huge, but the potential rewards are great too. Margin isn't an option for folks investing through a retirement account.
So long as the ETF is very well diversified, ideally across all sectors AND you have already see a drop of 25% or more, then 2 X leveraged ETF's should be fine. Anything above 2 x and would want to see the S&P for example already at a 40%+ decline, at which point 3 x leverage would be fine
@@FinancialWisdom Thanks! So you wouldn't recommend a 2x SOXX (semiconductor). Something like 2x QQQ, 2x IWM, 2x SPY would be better?
How would you implement such a strategy in IBKR?
Excellent video! Thank you very much for sharing this.
What percentage of your cash position would you allocate when making that initial purchase after a 25% drop and how much would you contribute after each subsequent 10% drop. Thanks again. Much appreciated!
10% on the initial drop and 10% for every 10% drop thereafter
Thank you for your response. Much appreciated🙏🏼
The longer you stick with this strategy the higher probability of getting sound returns especially with indeces or blue chips.
DCA in big market correction with using leverage will make you more pain tho
DCAing is good for entering... but when do you sell?
I may be a year late, but the idea is you add on those 25%+ pull backs and sell in your retirement years when/if you need that money to live on... Trying to time the market to sell the tops and renter on those pullbacks isn't the easiest thing to do, and the tax implications can make it not really worth it as well.
You are great... But please make more videos
Thanks, i'll try...
Do you set a -25% price drop from the previous high or over a set period?
Previous all time high
What about dividends and capital gains? By holding your money in cash and waiting for a rare 25% dip, wouldn’t you be missing out on profits within the index-based fund?
If this was your only strategy yes. I combine it with a breakout strategy too👍
@@FinancialWisdom I appreciate the response. For 3x leveraged ETFs, would you suggest a drop of at least 50% before buying?
Is there a way to automate this approach? Can I place an order in Robinhood for example whenever an index ETF is down 25%?
Sure, trailing stop
DCA works if the index is in a bull market super cycle. It won't work for NIkkei index or singapore index
Yes, that is worth highlighting, thanks.
In either of those indexes, a lumpsum would perform even more poorly. The nikki took almost 40yrs to break even from previous highs.
Dow Jones and sp500 is about to go into a super cycle crash. We just had 90 years of bull trend. Next is a multi decade bear trend like Nikkei. Most don’t believe we can have one, but the same demographic trends that Japan went through is what we are entering soon.
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So you are buying with two x leverage, how far can the stock far before you get a call to put more money in? Did you really explain that you are doubling the risk? How many times can a stock lose 50% in value?
Best way is to do Trend Following on indexes, to stay out of bear market, buy on bull trend start and keep positioned until it ends. No stress and nice profits!
Trying to come up with a strategy that combines DCA on single stocks after a huge draw back with the 200 EMA strategy not sure yet how to go about it lol
Quick Question:
What % of available capital are you scaling in when the market falls every 10% with the 25% strategy. Or are you deploying capital equivalent to the drawdown once it equals 25% (i.e. 35% drawdown means 35% portfolio investment (25% inital + 10% b/c further correction)?
10% on the initial drop and 10% for every 10% drop thereafter
@@FinancialWisdom And are you using a trailing or limit stop? If so what %?
@@acetheboss13 he isn't using any stop-loss here. Since its an index fund or ETF! Because in the long run , the indice/etf continuously rebalance itself so that it will always move up in the long run. So no need to worry about stop-loss. But like he said if it drops to another 10% lower after dropping 25% then he puts additional money into it.
Could this be applied to Bitcoin?
Due to volatility I would say maybe 50%, rather than 25%
what moving average do u prefer ,?? 200 DMA
20 week
What if your targeted index hits -25% and you buy in there, but it continues to -35% or even -50% and so on?
10% on the initial drop and 10% for every 10% drop thereafter
@francesco martini best is trend following
THANKS & FIRST
Well done👍🙏
You could pick twenty or more well established companies and the most you could lose is 5%. The advantage of owning the stocks is you can buy when they are at a discount instead of all at once with an index. Any new companies like Voyager should be treated as speculation and be a very small allocation. With partial shares you could just copy the index you want to follow with no expense ratio.
Great content....but I can't help but wonder is this your real voice lol
😊
Missing just about 10% of the best days in the stock market has a huge impact, Im not convinced waiting for discounts helps that much in the long run.
In a stand alone strategy I agree, but I combine this with a trading strategy which will capture the 10% too👍
Isn't this a form of "buy the dip" ?
That appears to be exactly what it is
Why not increasing leverage to 3x?
if you are comfortable with that.
What about all the money you lose if you sit on your money and wait for years for the -25%? O_o
I personally don't, I have a separate singular stock trading approach that runs along side this strategy taking advantage of growth. This 25% discount is just a bonus. Which we took advantage of last year to.
The idea sounds great on paper, but I sincerely doubt it works. If you wait for the 25% decline while the market is in its most significant upward trend, you're going to miss this entire trend. I suggest to take a look at other videos on YT that present some actual backtests proving how attempts at timing the market - which is what this is - all fail in the long term.
Not If you have a singular stock strategy on the trend up...
What if it never drops 25% in a year, you miss the whole bull market?
Not if you also have trading strategy for bull markets too
If you're DCA investing, then those positions haven't technically returned anything as you haven't sold them yet. In fact, not only did your money barely do anything from your first entry in 2016 thru the COVID lows in March 2020, you were likely UNDER WATER at that point, assuming your position sizes were all the same. That's a HUGE opportunity cost by doing this. So, I'm confused where you're getting these individual return numbers from if you didn't sell? And if you did sell, then you're really not DCA investing.
Ballparking your entry prices, again assuming all the same position sizes, your average cost was around $1320 (give or take as exact points aren't known). If that's the case, then your return at the current price noted in the video is around 35%. TOTAL. That's it. For 6 and a half years. That's honestly just garbage.
The biggest problem with this strategy is that you need to put in a somewhat significant amount of money every month AND do it consistently for 40+ years to have a useful nut at retirement. And, even if you are able to buy lows (difficult in and of itself), you still have to have the discipline to save all that money in the meantime and let it just sit there waiting for a buy point. The unfortunate reality of DCA is that, for most people, this kind of thing is just out of reach as life is just too financially erratic and the commitment is on too long of a timeline for them to keep up with it.
Respectfully I think you may be mis understanding the video/concept.
@@FinancialWisdom I'm open to criticism. Feel free to correct my assumptions and assertions.
@@dasfahrer8187 hey buddy , his strategy also works if it's applied correctly. Firstly, he isn't selling them before each drop(of course then it wouldn't be DCA) and he calculated the individual %returns by taking into consideration the time of investment till the current price of index/etf. For ex: If u invested 100$(ur 1st investment) when index price was 100 and suppose it goes to 140 and den again drops to 120(hypothetically assuming it's 25%drop from 140) then u make ur 2nd investment at 120 and then after long time..the index is at 200(the present time) ..he calculated %returns from 1st investment till now[so [(200-100/100)*100=100% ] and of 2nd investment[ (200-120/120)*100=66.6%]
So your net ROI will be 100 + 66 = 166% if u combined both(thou he hasn't combined them,I'm just telling you) and suppose u did the normal approach DCA and made investments at 110,120,105,160,100 then your point price of investment from these will be (add all of them/5 )=119. So this says your average buy price was 119..so it's ROI will be (200-119/119)*100=68% so his strategy > normal DCA. But the point you are confusing is , in normal DCA we invest small amounts on a regular fixed basis...but in his method , u don't get much opportunities but , when you get an opportunity like that , you invest a huge chunk (for ex , if u wanted to do DCA at 50$ per year and the dip came after 3 years , then u will put 150$(chunk) after the dip comes) so this will equal out the amount invest in your regular DCA and his method.
Hope its clear now mate.
This needs rethinking, I agree. Even I didn't got this the first time either.
The key here is,in his method thou you get lower opportunities, but since you invest larger chunks of money (and you put it precisely at larger dips like 25% from Highs.)this will produce better results than regular small amounts put into DCA.
@@FinancialWisdom Have I explained it correctly?
Or you could just get North East Way to trade your forex account and watch the money roll in. Just say'in
Average up, not down
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Everyone is 💩ing all over Jeremy. Nobody deserves it more. The grifter slaughter continues.
It does - Such poor education being spread to millions....
I find Jeremy's channel really odd, he seems to know what he's talking about and makes some really interesting comments and explains things well but his investing style is weird, it seems the more he diamond hands stocks the more admiration he gets from his followers.
@@FinancialWisdom In a way, though, we should blame the ignorance of his followers who should have put in a bit of effort and educated themselves. I guess he WAS deluded, unfortunately reinforced by his success, which he attributed to his innate skill and talent and NOT his LUCK! AS you say, he was too young to have the necessary perspective.
Over the 28yrs, since I started, I've seen many of these self-made gurus bite the dust and this is a pretty well known characteristic/phenomenum of human nature...in fact since biblical times when following various gurus (around the world), who believed they understood the ways of the world, was commonplace.🤔
NoAxe
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Would you have dollar cost averaged into the popping of the dotcom bubble? -adding more for two years as it pretty much continually went down?
I never, but I would have... don't forget you would have averaged in on other indices during that time too so somewhat diversified. These black swan type events are hard to account for and if you focus too much on them you would hardly be invested in the markets at all. There's always a risk hence why there is a good premium to be achieved in general...
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@@philipmason5190 *she can be liaised ,on Telegam,with the username @INVESTWITHNATHAN.*
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