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PostPosted: Fri Feb 09, 2018 7:43 pm 
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Well that’s fine so long as returns are always positive then hey !?

https://www.google.co.uk/amp/s/www.fool ... nsive.aspx

Read some Buffett or Ben graham as they explain this far better than I can.

For an index fund investment, for a newcomer , given the last couple of years events and market behaviour and volatility, a regular investment would have been wiser.

Best thing she can do now, is make another lump sum investment before the index recovers .


Oh and pls let me know where the ten percent return fund is that will never go down in value , so I can lump sum the shit out of it.


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PostPosted: Fri Feb 09, 2018 7:49 pm 
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It's simply using time to spread the risk, is it not ?


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PostPosted: Fri Feb 09, 2018 7:52 pm 
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camroc1 wrote:
It's simply using time to spread the risk, is it not ?


Pretty much

Yes you will miss the big ups , but you will also miss the big downs


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PostPosted: Fri Feb 09, 2018 7:56 pm 
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Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.


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PostPosted: Fri Feb 09, 2018 7:58 pm 
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MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


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PostPosted: Fri Feb 09, 2018 7:59 pm 
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bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?


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PostPosted: Fri Feb 09, 2018 8:00 pm 
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MaccTaff wrote:
bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?



Yep.


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PostPosted: Fri Feb 09, 2018 8:03 pm 
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bimboman wrote:
MaccTaff wrote:
bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?



Yep.


I suppose that period is quite a rarity (doesn’t make it not true though I appreciate!).

That 10 year period had the dot com bubble, 9/11, the Enron/Xerox accountancy scandals, the general 2003 shitness and finally the horrors of the credit crunch. Quite a decade!


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PostPosted: Fri Feb 09, 2018 8:08 pm 
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Image

:shock:

https://www.marketwatch.com/story/xiv-t ... 2018-02-06


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PostPosted: Fri Feb 09, 2018 8:12 pm 
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There's a few other decade period like it, the 70's were a horror show,


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PostPosted: Fri Feb 09, 2018 8:21 pm 
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MaccTaff wrote:
bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?


Ah I thought we were talking about index trackers here, most of them invested in income shares I believe by retail investors , not accumulation ones. A ftse 100 tracker accum should get you about 4% return I’d guess, something like that.

Would also depend when in the year you invested those lumps too.


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PostPosted: Fri Feb 09, 2018 8:37 pm 
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backrow wrote:
MaccTaff wrote:
bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?


Ah I thought we were talking about index trackers here, most of them invested in income shares I believe by retail investors , not accumulation ones. A ftse 100 tracker accum should get you about 4% return I’d guess, something like that.

Would also depend when in the year you invested those lumps too.



The ftse doesn't yield 4% (though it might next week)


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PostPosted: Fri Feb 09, 2018 8:41 pm 
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bimboman wrote:
backrow wrote:
MaccTaff wrote:
bimboman wrote:
MaccTaff wrote:
Pound cost averaging I assume we are talking about.

Depends how it’s done.

If someone gave me the choice of having the return from £10K invested as a lump sum over 10 years, or drip feeding the £10K monthly over 10 years, I’d take the lump sum every time. I’d be pretty certain it would be worth more.



That can depend on the entry point, if you bought equity indexes for 10 years 1999 -2009 you'd have lost money compared to averaging over that 10 year period.


Even with dividend reinvestment?


Ah I thought we were talking about index trackers here, most of them invested in income shares I believe by retail investors , not accumulation ones. A ftse 100 tracker accum should get you about 4% return I’d guess, something like that.

Would also depend when in the year you invested those lumps too.



The ftse doesn't yield 4% (though it might next week)


:lol:

:uhoh:


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PostPosted: Fri Feb 09, 2018 8:48 pm 
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backrow wrote:
Well that’s fine so long as returns are always positive then hey !?

https://www.google.co.uk/amp/s/www.fool ... nsive.aspx

Read some Buffett or Ben graham as they explain this far better than I can.

For an index fund investment, for a newcomer , given the last couple of years events and market behaviour and volatility, a regular investment would have been wiser.

Best thing she can do now, is make another lump sum investment before the index recovers .


Oh and pls let me know where the ten percent return fund is that will never go down in value , so I can lump sum the shit out of it.


I never suggested that an index fund couldn't go down in value. See that word "expected"? I've bolded it for you in my post:

goeagles wrote:
Hit me with a link then. It doesn't make any sense since you're screwing yourself out of expected returns by not investing the lump sum in the beginning. Let's use an example. Let's say you have $12,000 to invest and the expected return of the fund is 10% annually. That's equivalent to 0.7974% monthly return. If I invest the $12,000 as a lump sum at the beginning of the year, my expected return is $1200 and my expected portfolio is $13,200. However, let's say instead I opt to invest $1000 each month instead. My expected return at the end of the year in that case is only $640.54 and my expected portfolio is $12,640.54.


Now, maybe you think the 10% number is high. That was only an example, but the example works so long as your expected return is a positive number. And if you are investing in the market, you implicitly expect a positive return. If you're not familiar or comfortable with the concept of expected returns, you really shouldn't be dispensing financial advise to anyone, no matter how much Buffett you can regurgitate.


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PostPosted: Fri Feb 09, 2018 8:55 pm 
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BTW, the research backs up lump sum over dollar cost averaging: https://personal.vanguard.com/pdf/s315.pdf

Quote:
In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets.


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PostPosted: Fri Feb 09, 2018 9:03 pm 
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Research from vanguard , a fund provider . Interesting.

You are arguing the toss and trying to be patronising , I’m not going to bold what ive written already - you go ahead and invest lump sums then, that’s fine by me. It all depends on when you do the lump sum, and the lady here was unlucky. I’ve already said f the market went up she would have done better with the lump sum - but it didn’t, did it ?


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PostPosted: Fri Feb 09, 2018 9:03 pm 
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very sensible if you want to iron out the highs and lows


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PostPosted: Fri Feb 09, 2018 9:06 pm 
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shereblue wrote:
very sensible if you want to iron out the highs and lows


You had better bold the bits that you want me to understand there apparently .


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PostPosted: Fri Feb 09, 2018 9:08 pm 
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just meant that in a falling market regular investment works better than one off investment, pound cost averaging and all that - ideal for your wife I would have thought


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PostPosted: Fri Feb 09, 2018 9:10 pm 
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shereblue wrote:
just meant that in a falling market regular investment works better than one off investment, pound cost averaging and all that - ideal for your wife I would have thought


Um, think you mixing me up there with Rumham - my wife didn’t just lose anything by doing a badly timed lump sum investment - it was his bird.
And I was taking the piss out of goeagles trying to win the Internet


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PostPosted: Fri Feb 09, 2018 9:10 pm 
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backrow wrote:
Research from vanguard , a fund provider . Interesting.

You are arguing the toss and trying to be patronising , I’m not going to bold what ive written already - you go ahead and invest lump sums then, that’s fine by me. It all depends on when you do the lump sum, and the lady here was unlucky. I’ve already said f the market went up she would have done better with the lump sum - but it didn’t, did it ?


This was all a timing issue. If she did what she was advised to do months ago then we wouldn't have an issue. But she didn't. Tough shit!


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PostPosted: Fri Feb 09, 2018 9:16 pm 
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goeagles wrote:
BTW, the research backs up lump sum over dollar cost averaging: https://personal.vanguard.com/pdf/s315.pdf

Quote:
In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets.



That's only against a 1 year DCA period at the start of the 10 years, it doesn't back up your point regarding investing over the whole period ......

It also ignore that if the one year average was your aim you could hedge that entry with future and options. (A professional manager would).


Last edited by bimboman on Fri Feb 09, 2018 9:19 pm, edited 1 time in total.

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PostPosted: Fri Feb 09, 2018 9:18 pm 
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Sssshhh bimbo , don’t dare disagree with the Vanguard research, you will get bolded


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PostPosted: Fri Feb 09, 2018 9:20 pm 
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backrow wrote:
Research from vanguard , a fund provider . Interesting.

You are arguing the toss and trying to be patronising , I’m not going to bold what ive written already - you go ahead and invest lump sums then, that’s fine by me. It all depends on when you do the lump sum, and the lady here was unlucky. I’ve already said f the market went up she would have done better with the lump sum - but it didn’t, did it ?


Yes, actual research. Do you have any research that refutes it? Or do you have any flaws to point out in their methodology?

Since you're clearly unfamiliar with the concept of expected value/return, here's a primer: https://www.investopedia.com/terms/e/expected-value.asp

Yes, Rumham's wife was unlucky here. That does not mean it was a bad investment to do it as a lump sum. All you can do when investing is take all of the available info at the time to make the best decision. And because the research is clear that lump sum investing is superior to dollar cost averaging, lump sum was the correct decision to make. The only way it would be different would be if she had skill at market timing. However, because she is a novice, and because market timing even for experienced investors is extremely difficult, that would be impossible. So lump sum as soon as possible was clearly the way to go for her.


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PostPosted: Fri Feb 09, 2018 9:24 pm 
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Not the research you posted, that was a one year special.

And a note about EV as well, plenty of people using EV and trading volatility have lost a bloody fortune over the last 3-4 years.


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PostPosted: Fri Feb 09, 2018 9:25 pm 
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bimboman wrote:
goeagles wrote:
BTW, the research backs up lump sum over dollar cost averaging: https://personal.vanguard.com/pdf/s315.pdf

Quote:
In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets.



That's only against a 1 year DCA period at the start of the 10 years, it doesn't back up your point regarding investing over the whole period ......

It also ignore that if the one year average was your aim you could hedge that entry with future and options. (A professional manager would).


Huh? TVM is the concept here, and it doesn't matter when the DCA periods are.


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PostPosted: Fri Feb 09, 2018 9:28 pm 
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goeagles wrote:
bimboman wrote:
goeagles wrote:
BTW, the research backs up lump sum over dollar cost averaging: https://personal.vanguard.com/pdf/s315.pdf

Quote:
In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets.



That's only against a 1 year DCA period at the start of the 10 years, it doesn't back up your point regarding investing over the whole period ......

It also ignore that if the one year average was your aim you could hedge that entry with future and options. (A professional manager would).


Huh? TVM is the concept here, and it doesn't matter when the DCA periods are.



of course the DCA period is important, otherwise a 6 month and a 6 year option would be identically priced.


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PostPosted: Fri Feb 09, 2018 9:29 pm 
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bimboman wrote:
And a note about EV as well, plenty of people using EV and trading volatility have lost a bloody fortune over the last 3-4 years.


Huh? I'm not talking about using EV to trade volatility. Expected value is a very basic, core concept that underpins almost everything outside of risk in finance.


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PostPosted: Fri Feb 09, 2018 9:29 pm 
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:lol:

No retail investor bothers to weigh up expected returns or risk (bar maybe the odd rare maths nerd) - especially not for an index tracker !

I repeat, it’s precisely because she’s a beginner, in an index tracker, that a one off lump sum was not the best choice . It could easily have been split equally over 3 months or 6 or whatever, which over a ten year period would have had minimal effect of the funds not being fully invested , was spreading the purchase point risk.

I was not advocating taking that lump sum and spreading it over the entire ten year period or whatever - if you suddenly had ten k in your pocket then yes get it invested fairly rapidly and not dwindle in a bank account paying minimal interest.


Last edited by backrow on Fri Feb 09, 2018 9:32 pm, edited 1 time in total.

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PostPosted: Fri Feb 09, 2018 9:30 pm 
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bimboman wrote:
goeagles wrote:
bimboman wrote:
goeagles wrote:
BTW, the research backs up lump sum over dollar cost averaging: https://personal.vanguard.com/pdf/s315.pdf

Quote:
In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets.



That's only against a 1 year DCA period at the start of the 10 years, it doesn't back up your point regarding investing over the whole period ......

It also ignore that if the one year average was your aim you could hedge that entry with future and options. (A professional manager would).


Huh? TVM is the concept here, and it doesn't matter when the DCA periods are.



of course the DCA period is important, otherwise a 6 month and a 6 year option would be identically priced.


I'm not arguing that. What I'm arguing is that any DCA has a lower expected return than a lump sum because of TVM.


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PostPosted: Fri Feb 09, 2018 9:36 pm 
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Rumham wrote:
backrow wrote:
Research from vanguard , a fund provider . Interesting.

You are arguing the toss and trying to be patronising , I’m not going to bold what ive written already - you go ahead and invest lump sums then, that’s fine by me. It all depends on when you do the lump sum, and the lady here was unlucky. I’ve already said f the market went up she would have done better with the lump sum - but it didn’t, did it ?


This was all a timing issue. If she did what she was advised to do months ago then we wouldn't have an issue. But she didn't. Tough shit!


Yup, purely a timing issue and bad luck. Which is the main point.
Investment noobs should I think start by trying to minimise risk , not maximise returns.


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PostPosted: Fri Feb 09, 2018 9:36 pm 
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backrow wrote:
:lol:

No retail investor bothers to weigh up expected returns or risk (bar maybe the odd rare maths nerd) - especially not for an index tracker !

I repeat, it’s precisely because she’s a beginner, in an index tracker, that a one off lump sum was not the best choice . It could easily have been split equally over 3 months or 6 or whatever, which over a ten year period would have had minimal effect of the funds not being fully invested , was spreading the purchase point risk.

I was not advocating taking that lump sum and spreading it over the entire ten year period or whatever - if you suddenly had ten k in your pocket then yes get it invested fairly rapidly and not dwindle in a bank account paying minimal interest.


And you're still wrong, no matter how many times you repeat it.


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PostPosted: Fri Feb 09, 2018 9:38 pm 
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goeagles wrote:
backrow wrote:
:lol:

No retail investor bothers to weigh up expected returns or risk (bar maybe the odd rare maths nerd) - especially not for an index tracker !

I repeat, it’s precisely because she’s a beginner, in an index tracker, that a one off lump sum was not the best choice . It could easily have been split equally over 3 months or 6 or whatever, which over a ten year period would have had minimal effect of the funds not being fully invested , was spreading the purchase point risk.

I was not advocating taking that lump sum and spreading it over the entire ten year period or whatever - if you suddenly had ten k in your pocket then yes get it invested fairly rapidly and not dwindle in a bank account paying minimal interest.


And you're still wrong, no matter how many times you repeat it.


Nope, you are still wrong.


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PostPosted: Fri Feb 09, 2018 9:46 pm 
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backrow wrote:
Rumham wrote:
backrow wrote:
Research from vanguard , a fund provider . Interesting.

You are arguing the toss and trying to be patronising , I’m not going to bold what ive written already - you go ahead and invest lump sums then, that’s fine by me. It all depends on when you do the lump sum, and the lady here was unlucky. I’ve already said f the market went up she would have done better with the lump sum - but it didn’t, did it ?


This was all a timing issue. If she did what she was advised to do months ago then we wouldn't have an issue. But she didn't. Tough shit!


Yup, purely a timing issue and bad luck. Which is the main point.
Investment noobs should I think start by trying to minimise risk , not maximise returns.


Again, this was a toe in the water investment and not close to what could have been punted. And now she should get back in when the dust settles and go again. You are over egging the pudding here with the noob investing lump sums and I think you were the one who actually brought that term up.


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PostPosted: Fri Feb 09, 2018 9:48 pm 
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Quote:
I'm not arguing that. What I'm arguing is that any DCA has a lower expected return than a lump sum because of TVM.


Depends on other factors, one of which would be the historical price and volatility of the investment.


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PostPosted: Fri Feb 09, 2018 9:49 pm 
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bimboman wrote:
Quote:
I'm not arguing that. What I'm arguing is that any DCA has a lower expected return than a lump sum because of TVM.


Depends on other factors, one of which would be the historical price and volatility of the investment.


Go on...


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PostPosted: Fri Feb 09, 2018 9:52 pm 
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goeagles wrote:
bimboman wrote:
Quote:
I'm not arguing that. What I'm arguing is that any DCA has a lower expected return than a lump sum because of TVM.


Depends on other factors, one of which would be the historical price and volatility of the investment.


Go on...



Expected value is now measured on a historical curve, high prices, high (or low) historical vol are measured into the equation. For example my wealth manager hasn't invested in equity markets for 6 months or so now due to the relative levels. They've cited lower expected returns as a reason to not take money.


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PostPosted: Fri Feb 09, 2018 10:23 pm 
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bimboman wrote:
goeagles wrote:
bimboman wrote:
Quote:
I'm not arguing that. What I'm arguing is that any DCA has a lower expected return than a lump sum because of TVM.


Depends on other factors, one of which would be the historical price and volatility of the investment.


Go on...



Expected value is now measured on a historical curve, high prices, high (or low) historical vol are measured into the equation. For example my wealth manager hasn't invested in equity markets for 6 months or so now due to the relative levels. They've cited lower expected returns as a reason to not take money.


We are talking about two different aspects of expected value here. What I am talking about is expected value as a concept, which does not need to be measured at all. It just exists conceptually and underpins other financial concepts. If I'm understanding correctly, you're talking about how expected return/value is calculated by your wealth manager.

In the discussion before, our options were essentially binary: invest in equities or sit on cash (DCA in that case is a form of sitting on cash for the total amount that hasn't been invested yet). So if the expected return on equities is greater than zero, the expected return on the lump sum will always be greater than the expected return on DCA precisely because of TVM. And if the expected return is negative, you shouldn't be doing DCA either as you should be sitting entirely on cash (let's keep the options binary and assume shorting the market and options isn't aren't possible).

Back in the real world, and for an experienced and innovative investor, we have lots of other alternative investments besides just equities and cash. We have bonds, real estate, commodities, cryptos (gasp!) and many more. So in order to invest in equities*, that (risk-adjusted?) return would not only have to be greater than zero but would also need to be better than in other asset classes. Introducing these extra variables makes for a more interesting conversation and is certainly more relevant to your personal investing choices, but isn't relevant to Rumham's wife's theoretical choice between DCA and lump sum in the equities market.

*This is a simplified analysis for brevity. A more thorough analysis would obviously want to consider diversification across asset classes based on correlation with each other.


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