As most people are saying here, don't waste your time asking that question and reading through the replies. Being honest with you in that you are better off spending your time reading about (aka googling it and reading different sources, comparing the results and then making a decision). I would recommend staying away from the stock market, because it isn't a perfect science that requires a lot of time and focus. You can't just jump drop $10k and expect to make money. Put that $10k into a Roth IRA/401k and save yourself the pain.
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03-20-2017, 07:16 PM #61
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03-20-2017, 07:21 PM #62
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03-20-2017, 08:47 PM #63
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03-20-2017, 09:00 PM #64
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I agree with you that the reason people invest in index funds is for a steady return. And really, the biggest part of that is due to fees (index funds are generally low fee and will outperform an actively managed fund with high fees almost every single time).
And yes, the market will eventually come down. It always does. But then it'll go back up. How do you know when you're actually buying and selling the dip?
Play this game and see if you can beat it This game will show you just how foolish it is to sell stocks right now. Also, keep in mind that it's based on historical periods, so you can potentially beat it if you know enough about historical performance. With that knowledge, can you still beat it? Or does it just reinforce how difficult that is?
Anyway, I mostly wanted to address your point about interest rates. Everyone thought that when the Fed finally raised them last week, the market would surely get the drop that we've been waiting for. And what happened? All those people waiting for the dip were wrong. Again. Or hell, what about all the people that were sure a Trump win would mean a significant drop. Meanwhile we're up like 16%.
I'm also not sure what your example was between 2001 and 2011, but had you bought in regularly over those years, you would have made a significant amount of money. Most people don't just buy in one year and hold it for a decade. They buy every month, or maybe even two weeks. Dollar cost averaging in a long period like that is quite advantageous because you DO end up buying most of the dips. You get the peaks too, but it evens out the volatility.
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03-20-2017, 09:05 PM #65
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03-20-2017, 09:05 PM #66
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03-20-2017, 09:14 PM #67
Really oversimplified question to your response:
DCA every 2 weeks would typically reduce your time in the market? If you're spreading your contributions out over a year but could afford to put more in sooner isn't it a disservice? I fully understand you're trying to hedge against volitity but if you're investing for retirement (30+ years in the market) shouldn't it be more important just to get those funds rolling with whatever you're able to contribute especially with dividends?
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03-20-2017, 09:18 PM #68
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Most people DCA their investments by default because they buy investments over time as they are earning money.
But yes, according to Vanguard's studies, in about two thirds of cases it is better to lump sum invest than dollar cost average, if you were to already have a sum of money to be invested.http://youtube.com/user/Kiknskreem
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03-20-2017, 09:19 PM #69
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03-20-2017, 09:20 PM #70
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03-20-2017, 09:30 PM #71
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03-20-2017, 09:30 PM #72
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I have no respect for the way you respond to posters in this thread, really disrespectful for someone coming off as knowledgeable yet unable to restrain emotion.
Since I should of assumed you'd jump on my post, I should of said individual stocks. For someone not familiar with where they want to put their money, an ETF would be the safest bet.Education is humanity's key to salvation.
"The first casualty, when war comes, is truth"
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03-20-2017, 09:51 PM #73
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03-20-2017, 10:55 PM #74
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03-20-2017, 11:14 PM #75
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03-20-2017, 11:16 PM #76
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03-20-2017, 11:32 PM #77
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03-21-2017, 12:43 AM #78
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03-21-2017, 12:45 AM #79
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03-21-2017, 12:51 AM #80
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03-21-2017, 05:36 AM #81
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03-21-2017, 06:05 AM #82
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03-21-2017, 06:47 AM #83
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Kiknskreem mostly answered it. My example was just because he mentioned 2001 to 2011 as if he was only looking at start value and end value. While that works if someone is doing a lump sum, the vast majority (probably all) investors don't do that. At the very least you might have a lump sum in a year, but then continue to invest over the next decade. The only exception I suppose would be retirees.
But you're correct that time in market almost always beats DCA. I think the biggest overlooked reason why is that you get dividend payouts on all your shares, and the longer you own them the more you get. While DCA might have you buy in some shares lower (and hence cheaper, potentially getting more total shares), because you own them for less time it may be a wash. And you're only going to come out ahead with DCA if you get lucky and end up timing the market by accident.
I think the biggest takeaway for people should be that most of us are going to be long term investors. When you're talking about 401k's and IRA's, that's a given. Long term investors maximize their performance with time, and that's why doing a lump sum in an index fund wins. Lump sum means more time in the market, and almost no institutional investors can beat an index over a long period of time.
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03-21-2017, 06:58 AM #84
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