Investing in SPY using dollar cost averaging, searching for ideas.
- Thread starter FreakofNature
- Start date
Imagine this say you got 50k in the account
You buy 1 ES, no problem at all
You buy 500 SPY @ current levels, now you paying interest rates on the borrowed leveraged above 50k
That's quite absurd.
You buy 1 ES, no problem at all
You buy 500 SPY @ current levels, now you paying interest rates on the borrowed leveraged above 50k
That's quite absurd.
Obviously, this is a personal decision, but I don't like the idea of dollar cost averaging the stock market. And if I were going to do it, I'd probably sell naked puts instead of buying futures or ETFs.
The reason I don't like this approach is that it assumes the market ultimately rises. I can't say with any certainty that is a valid assumption now. In decades past it was, but the S&P is basically flat over 10 years. So you have to answer the question, is it reversion to the long term mean time or are we in a new paradigm?
If my long term strategy was trying to buy dips and get a good cost basis, I would wait for big selloffs, marked by extreme negative A/D. Why get ground up in a long decline? Wait for the capitulation move.
Dollar cost averaging is generally aimed at people who are putting a fixed amount from their income into the market every month. The idea is not that you average down, but you buy more at lower prices and less at higher prices because you are devoting the same amount of dollars each time period.
The other issue I have is that you are not really achieving diversification with the S&P 500. You are basically 100% in US dollars, which has been problematic, plus you are not hedged to oil/gold/ags, etc.
The reason I don't like this approach is that it assumes the market ultimately rises. I can't say with any certainty that is a valid assumption now. In decades past it was, but the S&P is basically flat over 10 years. So you have to answer the question, is it reversion to the long term mean time or are we in a new paradigm?
If my long term strategy was trying to buy dips and get a good cost basis, I would wait for big selloffs, marked by extreme negative A/D. Why get ground up in a long decline? Wait for the capitulation move.
Dollar cost averaging is generally aimed at people who are putting a fixed amount from their income into the market every month. The idea is not that you average down, but you buy more at lower prices and less at higher prices because you are devoting the same amount of dollars each time period.
The other issue I have is that you are not really achieving diversification with the S&P 500. You are basically 100% in US dollars, which has been problematic, plus you are not hedged to oil/gold/ags, etc.
All valid points except that dollar cost averaging in a flat market does work, provided there was volatility in between.
As far as better long term solutions, what do you have in mind ?
Only thing out there that I see rising is Gold but that's even less diversified within itself.
Another idea would be dollar cost averaging shorts.
You could even dca SPY and dca shorts in DIA. Then you would benefit from 2 rounds of DCA with near zero market risk.
Then of course, you could become a trader instead.
My trading returns are too abysmal to commit good capital to trading otherwise I would forget about long term stuff and just do that.
Unfortunately, I'm not part of the Elite in ET as far as daytrading goes
FoN
I was in a hurry when I wrote my last post, therefore I will elaborate on this statement.
We never got back to those 1500 levels but the amount of profits I made accumulating on the way down in 2008 and 2009 was probably the best investment I ever made.
I just plan to do a bit of the same, I don't need new highs, I just need to go over the mean, adjust the stop and trail it.
well now you're just talking about trading, only instead of hours you're going to try years.
Number one, you can't consistently make money trading assuming the mkt is always going to move one way. Although I bet there are many people who have suddenly discovered they are quite excellent gold traders.
Number two, once you introduce stops, you need really big profits to overcome the losses. This is just daytrading ES 101 only in years.
Number three, If you DCA into SPY over time, if past results are indicative of future performance, you will make money unless you die at just wrong time.
Many young kids look at buy and hold S&P for the last 10 yrs and it doesn't seem like such a good idea. What has it been, 3%?
I don't know the numbers, but I bet DCA over 20 yrs has been good. Better probably than the yearly returns of 90% of all posters on this site.
Now what's that they always write in small print at the bottom of those mutual fund prospectus's?