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How Investing Dimes Can Beat Dollars

Sunday, April 14, 2013 - 8:09 AM
This Wall Street Journal article describes the benefits of dollar-cost averaging, especially in today’s stock market when there’s a lot of concern that we’re in another stock market bubble created by the Fed’s easy monetary policy.
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,754
1. Sunday, April 14, 2013 - 12:16 PM
Dear KenBDG,

Article states: Instead, we tend to rush headlong into stocks when the market is frothy and retreat when it's plumbing new lows.

It is unclear who this "we" might be.  Of course it is silly to speak for others as the author is doing. I for one, do not necessarily rush headlong into stocks when market is frothy, and neither do I necessarily retreat when it is plumbing to new lows.

Article states: True, you'll end up putting some money into the market at exactly the wrong time, concedes Mr. Malkiel, but more importantly, he says, "you're also going to put some in at exactly the right time."

Err ... It is quite unclear why more importance is given to "some" money put at right time, and less to "some" that is put at wrong time.  Mathematically, importance of each equal dollar amount is identical, unless we have something like "first among equals".   :-)

Statistically, wrong-time and right-time have identical implications negatively and positively respectively, which makes importance of each time equal as well!  Mr. Malkiel's best seller "Random Walk down Wall Street" has some galring mathematical/statistical flaws.  ;-)

Article states: Mr. Malkiel thinks the insurance is well worth the price. "What dollar-cost averaging does is minimize regret," he explains. "If you put all your money in at one time and it was a top, you feel like such a **** fool and you never put any money in the market again."

I suspect the comments about "regret" and how one "feels", stray into ares that generally are not speciality of mathematicians, and statisticians, but are speciality of psychologists.  ;-)

Yours Truly,
- Anon
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623