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Investing in SPY using dollar cost averaging, searching for ideas.
- Thread starter FreakofNature
- Start date
Quote from Random.Capital:
It is. What he's describing is a form market timing, not DCA.
Oh, wasn't sure - thanks.
Imagine investing the same amount ( or more ) every year from 1970 to 2000.
You would be sitting real pretty right now. Any sort of market timing seems almost dumb in comparison IMO. Not that I am on top of all the statistics etc..
now imagine from 1905 to 1935Quote from Algo_Design_Kid:
Oh, wasn't sure - thanks.
Imagine investing the same amount ( or more ) every year from 1970 to 2000.
You would be sitting real pretty right now. Any sort of market timing seems almost dumb in comparison IMO. Not that I am on top of all the statistics etc..
Quote from Algo_Design_Kid:
That is really cherry picking dates though.
Maybe. Right where we are now, you're looking at over a decade of no positive gains in the US equity markets.
Another bad couple of weeks and we're looking at fifteen years of no advancement.
Cherry picked or not, these things happen quite regularly.
The bottom line is that, over the long run, equity markets are not a wealth generation device. Which means they have to destroy wealth for extended periods to make up for the wealth they create during other periods.
The "system" requires you to wait 2 years from the onset of bear which is measured rear view mirror. How do you know that it wasn't a correction in a bull market, you will know 2 years later from the top. If we make new year highs, the count resets and so on. System does not begin adding before 2 year period terminates. If you were to add at 1100, you are adding way too early in the system.
Quote from FreakofNature:
Interesting and not very far from what I do.
Top was 1375 less 20% that places us at 1100 so based on your strategy the DCA began last week for a first position.
Funny enough that first position is aprox 75 points green now, albeit on just 1 unit.
Any input on how to spread the additional buys and what kind of position management to use, max risk etc ?
Thank you for your post you presented a very interesting variable I had not used before, time.
Quote from Random.Capital:
Maybe. Right where we are now, you're looking at over a decade of no positive gains in the US equity markets.
Another bad couple of weeks and we're looking at fifteen years of no advancement.
Cherry picked or not, these things happen quite regularly.
The bottom line is that, over the long run, equity markets are not a wealth generation device. Which means they have to destroy wealth for extended periods to make up for the wealth they create during other periods.
Well I am not so sure.
If you are truly DCA I believe you are investing less money at the top and much more at the bottom.
I haven't ran the statistics myself like I said, but if I did I believe you would be net positive at this position right now if you started in 2000 even.
I might put some more research into it if I get the drive to do so.
I know, I was trying to think just off the top of my head what the worst would be, but that's why I say, for it not to work out you would just have to be born and die on really bad days.Quote from Algo_Design_Kid:
I still believe you would be doing well.
That is really cherry picking dates though.
ok, now you're starting to worry me. Like when I first started experimenting with not believing in God.Quote from Random.Capital:
bottom line is that, over the long run, equity markets are not a wealth generation device. Which means they have to destroy wealth for extended periods to make up for the wealth they create during other periods.
I must say, it was a lot easier to make money in this business when I was a broker than when I became an independent trader.
I see all these rich people on Wall Street, and I see all these rich casino operators in Las Vegas.
But where are all the customers yachts?
Quote from oldtime:
I know, I was trying to think just off the top of my head what the worst would be, but that's why I say, for it not to work out you would just have to be born and die on really bad days.
Even if we started in year 2000, investing $1000 at the beginning of every year into SPY here is something close to what you would have done.
2000 - 152 = 6.57 shares
2001 - 125 = 8
2002 - 115 = 8.69
2003 - 85 = 11
2004 - 100 = 10
2005 - 120 = 8.3
2006 - 125 = 8
2007 - 140 = 7.14
2008 - 135 ( bad luck ) = 7.4
2009 - 90 = 11
2010 - 110 = 9
2011 - 130 = 7.6
At an average price of 118 you would have 102 shares.
I did this math quickly so I could have made some errors.
You also have to take into consideration any tax consequence + commissions + other things you could have been doing with your money to see if this makes real sense to you personally.
This kind of up and down will probably continue for another decade if consistent with previous markets. IMO we are just in a major consolidation.
Oddly enough SPY is sitting at 118.
What are the odds? hahaha
EDIT: I am not sure if I did this correctly after going back through.. I may need to edit this later