Kindle Notes & Highlights
Read between
December 31, 2018 - January 23, 2019
Dollar cost averaging usually does provide higher returns in the stock market over short- and intermediate-term investment periods.
對照組是constant share purchase
The average purchase cost of your holdings would simply be the average market price over the investment period.
CS是購買期間市場價值的平均價格
INTERNAL RATE OF RETURN (IRR)
重要觀念
it is the fixed yield you would have to earn on a bank account that receives all of your investment inflows in order to match the performance of your investment (that is, produce the resulting outflows).
DCA will always have a lower share price, but the DCA return can be lower in a particularly good or bad year, such as 1954.
the risk reduction due to time diversification.
The average share price reduction provided by dollar cost averaging gives you a reasonable chance at enhancing your investment rate of return over short- and medium-term investment periods.
it plays very little role in your overall return, compared with the performance of your investment.
bad year is a bad year, even with dollar ...
This highlight has been truncated due to consecutive passage length restrictions.
investment vehicle you choose (and how it fares) is far more important to your results than the mechanical ru...
This highlight has been truncated due to consecutive passage length restrictions.
Worse than that, it wouldn’t have made much sense to dollar cost average with the same investment amount (be it $1, $100, or any fixed amount) over this entire period.
Due to inflation, today’s dollar is only worth one-eighth of its earlier value.
because the stock market grows much faster than inflation over time.
Because our investment amount so radically lags behind market growth, our exposure to market risk is not very well balanced over time.
Due to its lack of growth, the dollar cost averaging strategy gradually “fades away” over time,
But if the so-called fixed amount of the dollar cost averaging investment had been increased by some steady amount over the 66 years, it could have resulted in a 1991 portfolio with roughly this larger value.
using this growth-equalized dollar cost averaging strategy,
investment formula must somehow attempt to keep up with the phenomenal growth in the market over long-term investment periods.
Dollar cost averaging is a “Buy low, buy less high” strategy, as there are no rules for selling.
A large upward price swing often results in a sale of stock, instead of a purchase.
With value averaging, this occurs because we are not just “buying low,” as with dollar cost averaging; we are buying even more than usual when the share price moves exceptionally low.
The occasional selling indicated by value averaging rules is probably the single most interesting characteristic of the strategy.
You will sell (or buy far fewer than normal) shares at a market peak because, after all, the price must have gone up to have resulted in a market peak.
If you follow its prescription, value averaging forces you to avoid big moves into a peaked market or panic selling at the bottom.
tax complications and transaction costs
The possible relative gains of the VA strategy seem quite high in both frequency and magnitude, and they compare quite favorably with the risks (relative to DCA).
Following a “pure” value averaging strategy yields five-year results that are a bit more spotty than one-year results.
In many years, the strategy used plays very little role in your overall return, compared with your investment’s performance. That is, a bad year is a bad year even with value averaging
The investment vehicle you choose is far more important to your results than the mechanical rules you follow to invest in it.
best to use value averaging with very diversif...
This highlight has been truncated due to consecutive passage length restrictions.
Value averaging, like its counterpart DCA, fails to take market growth into account in its “linear value path”
fail to keep up with the market
will seriously reduce your investments’ total market exposure...
This highlight has been truncated due to consecutive passage length restrictions.
the fixed-amount rules just don’t make any sense over a long investment period, due to inflation and to extensive growth in the level of value of the stock market.
Still, you can see that the fixed, linear, “pure” VA strategy totally loses touch with the reality of sizable increases compounded over time in the market, when viewed in the long run.
as market levels rise over time, VA actually acts to consistently move you out of the market, as opposed to accumulating shares in it.
In the first few months of the accumulation, note how the need for investment (the increase in the “cumulative cost of shares”) is close to the desired increase in value.
這種方法在一開始價值的來源是投資者的錢，到一定程度後，價值增加的來源是已投資的資產
to adjust the value path for inflation.
The inflation-adjusted strategies still provide no advantage.
If you expect your investments to outperform inflation (which they had better in the long run), and you set a value path at the inflation rate, then you will actually end up less and less invested in the market over a long period. Your value path will simply fall way behind market growth.
called the adjustment growth equalization.
The main lesson to be repeated here is that the investment formula must somehow keep up with the phenomenal growth in the market over long-term investment periods.
“Value Averaging: A New Approach to Accumulation,”
Because the “value” of moving each investment up in time by a year is an extra year’s interest throughout, we can just add that interest into the final growth factor, increasing the final $45.60 growth factor by 10%, or multiplying it by 1.10, to get a factor of 50.16, yielding a required beginning-of-year investment of $1,994 over the next 18 years.
這是什麼意思？
年終結算時把結算利息直接在年初投入計息報酬？
Remember that the distinction is not the beginning or end of the calendar period but is relative to today—do you make the first $C investment right away, or do you wait one investment period before doing so?
不懂
When you are invested in any risky investment—such as the stock market—there are no return guarantees.
four logical steps in the procedure to determine the investment amount ($C): 1. Determine Vt, your investment goal for time t; 2. Determine the r, or expected rate of return, that you reasonably expect to get on average, after taxes; 3. Use the annuity formula or a financial calculator or computer to calculate the required ($C) fixed-dollar per-period investment to achieve your goal in step 1 at the rate in step 2 in t periods; 4. After several periods, recalculate the new amount required, using your actual value today as the starting point for the remainder of your investment time available.
...more
1000？
