Quote from tradestrong:
If you're in for the long run and dollar cost averaging, what do you care if the market tanks? Don't be fooled by those pointing to the market top in 2000 and saying..."see...we haven't had any growth in 8 years".
Sure, if you invested EVERYTHING at the very top and never invested another dime, then yes, you have no growth.
But if you're dollar cost averaging over many years, you inevitably buy more cheap shares and less expensive shares. Just move some to cash when markets look toppy, and then reinvest the cash in layers during a bear market. Again, who cares if you don't get all back in at the bottom? On top of that, dividends give you growth as well.
If you had invested all through the great depression, and didn't go all in at the top, you would have made a fortune in the 20 years after the depression.
Absolutely!!! If a person had simply bought the S&P in January of 1934 with $10,000 (yes, a good bit of money back then), they would have been worth over $14,200,000 in 2002. That's in 2002, at the low, the crash, the market's death, blood in the streets, "it's never getting any better," etc., 2002.
That's WITHOUT doing as tradestrong has suggested which is Dollar Cost Averaging. If one had kept adding money each month from then until 2002?:eek: HUGE $$$$$$$$$$$$
In my time I have not seen a better mothod of long term investing than a monthly DCA of a set amount buying more shares when markets are oversold, and less when overbought.
Btw, if anyone wants to know, there were 69 reasons why not to invest from then until 2002. Depression, War 1941 (makes Iraq look like a pussy hair, and I was in Iraq twice with the Marine Corps and have that right to say so! Ooh rah! No, there was no 24 hr news back in 1941 streaming how many thousands of Americans were being blown to shit BY THE HOUR!!), Cold War, Missles, Vietnam War, Inflation, Deflation, Stagflation, Oil prices skyrocketing (1979, which I am old enough to remember the gas lines), Terrorism, etc.,
Anytime I have a skeptic in my office the first thing I do is show them the bad of each year from 1934 until 2002, then the simple S&P chart with numbers NO ONE can argue with. After that, if they want to manage their own affairs, I will print off a list of books they will need to buy, and self-evaluation exams they will need to take, that will enable them in about three years to have at least an idea of how investing works so they can at least paper trade (at least another two years+) before they should even fathom putting their RETIREMENT ACCOUNT in their own hands.:eek: Scary, but they do it all the time. That is... Lose their retirement assets in 1-3 years, adding liquidity to our markets (LOL!), and living off Social Security while cursing under their breath about why no one showed them the right way.
Yes, I'll address this before anyone asks. "What if I put all of my money in the markets in 2003, and was going to retire in 2008?" Well, not many can say that. But if so, that means if one would have put ALL of their money in the SPX in 2003, they would have a +31.62% return as of today's volitale market.
So those who say "cash is king," may be right. Today... Long term, I don't think so.
Great post tradestrong!
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