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December 31, 2018 - January 23, 2019
The power of the value averaging method derives from its marriage of two proven but heretofore separate techniques: dollar cost averaging and portfolio rebalancing.
First, you must actually be able to save.
Second, and just as important, you must be able to execute.
still recommend employing value averaging using quarterly (or similar) investment periods.
The analysis presumes reinvestment of dividends (total return analysis), although I re-ran all analyses on price-only index returns and got essentially the same results.
An academic study by Professor Paul S. Marshall on value averaging was published a few years ago (JFSD Vol. 13, No.1, Spring 2000).
John Wiley & Sons is making available to you a few of my Excel spreadsheets as a supplement to this book on its Web site through 2007.
dollar cost averaging, whereby you invest the same amount of money in an asset each regular investment period, regardless of its price.
invest whatever is needed to make the value of your asset holdings increase by some preset amount each investment period.
rebalancing your holdings among asset types;
constant-ratio plans dictate that a fixed percentage of your wealth should be held in stocks.
Dollar cost averaging helps a bit on the “buy low” side, but it provides no guidelines for selling. Value averaging has the effect of exaggerating purchases when the market moves lower, but buying less and sometimes even selling shares when the market moves higher.
over time the market has risen substantially.
在人類經濟發展史上，長期來看，人類的經濟發展一直是在向上成長的。
The average market return for one month is slightly under +1.0% (0.95% monthly), or 12% annualized.
Individual stocks, of course, exhibit much more variability than the market as a whole, so avoid confusing typical market returns with what might happen to a single stock.
This is evident in Figure 1-4a, where instead of looking at one-year investments, we look at four-year periods.
While still less variable than single-year returns, these 4-year returns show a different pattern with more losses.
on average, you will win money or earn some positive return in the stock market (e.g., the +12% average noted above).
Also, unlike the potentially disappearing bankroll you take into the casino, there is no way the value of your diversified stock portfolio or fund will ever go to zero (even though any individual stock might).
The market tends to rise over time. Over just a brief instant of “market time,” this trend is indiscernible.
But as we allow more time, the upward trend compounds, while at the same time the random bounces average each other out.
5年內會用到的資金應避免投資（？）
The reward for these risks over time has not been great;
no guarantee that the next 66 years will be anything like the past.
relative return, not the absolute return,
The most relevant number to project into the future seems to be the 7% difference between common stock and government bond returns.
The risk is that the actual outcome could end up very far (in either direction) from the expected value.
One way to measure this risk is called the standard deviation.
the standard deviation is the square root of the variance;
Note that these numbers apply to the returns (including dividends) on the market as a whole, and not to a particular stock, industry, or other undiversified investment.
buy-and-hold posture in the market,
you just never know beforehand
most attempts by small investors to time the market are doomed to failure.
In fact, many market technicians and professionals tend to use levels of small investor sentiment such as odd-lot sales, mutual fund inflow/outflow statistics, and investor surveys to gauge when the market is overbought or saturated (indicators that are too positive supposedly portend a down market), or when investor depression is a potential precursor to a turn upward.
Whereas typical timing strategies involve active decisions about moving money into and out of the stock market (or other investments), formula strategies are nothing more than passive guidelines toward the same end.
Passive formula investing is not meant to beat the market but merely to survive in it and end up with the proper reward for the risk incurred.
mere survival in the market grants fairly substantial rewards that grow even more substantial over time.
They will, we hope, give you the investment returns you deserve to compensate you for risk while guiding you away from the trap that snares so many investors—that of buying high, then panicking and selling low.
dollar cost averaging,
Value averaging
risk as used here is the expected standard deviation (typical variation from the average) of annual returns.
Looking forward, though, most experts agree that the expected return on the market now is lower than had been predicted in the early 1990s.
Dollar Cost Averaging Revisited
Invest the same amount of money each time period, regardless of the price.
Dollar cost averaging is an automatic market timing mechanism that eliminates the need for active market timing.
“Dollar cost averaging gives you time diversification.”
Spreading out your actual purchases over time is a different sort of risk-reducing diversification.
If you dollar cost average over long periods of time, you can take advantage of both forms of time diversification to reduce your investment risk.
A better measure for the success of the dollar cost averaging strategy, because it accounts for the “time-value” of money, is the rate of return, also called IRR for internal rate of return.
It is simple and easy to apply. • It increases the rate of return (and reduces the average share cost) of the investment.
