Help a newbie investor

[prawncrackers]

Hi all,

I'm completely new to this, but want to start investing my money in index funds so it doesnt get eaten by the inflation.

Been reading about DCA quite a bit, and i understand that proper DCA requires investor to put money in at the same time every month.

What are your thoughts if instead of putting money in on the same day, the investor waited a few days or even until the next month if when the index price is higher than his portfolio average at that point of time?

 

[w1rbelw1nd]

Hi all,

I'm completely new to this, but want to start investing my money in index funds so it doesnt get eaten by the inflation.

Been reading about DCA quite a bit, and i understand that proper DCA requires investor to put money in at the same time every month.

What are your thoughts if instead of putting money in on the same day, the investor waited a few days or even until the next month if when the index price is higher than his portfolio average at that point of time?

thats speculating already, which is against the spirit of DCA. You will never know what happens if the index never ever drops to that level again

 

[Tornesoul]

yup as above, it technically isnt DCA anymore.

rather then looking at a monthly time frame of prices being high, you should look at the longer horizon of say 20-40 years.

one issue with sg DIY DCA is that unless your monthly capital is high, you cant really efficiently dca due to lot size of 100 shares. give and take, its the best we got for diy.

unless you want to use bank programmes like posb invest saver etc, where they can give exact number of shares according to how much u put in monthly. however you gotta see if u r ok with the fees first.

then again, it's easy to preach and talk about theories. execution is another issue. guilty as charged

 

[Perisher]

Hi all,

I'm completely new to this, but want to start investing my money in index funds so it doesnt get eaten by the inflation.

Been reading about DCA quite a bit, and i understand that proper DCA requires investor to put money in at the same time every month.

What are your thoughts if instead of putting money in on the same day, the investor waited a few days or even until the next month if when the index price is higher than his portfolio average at that point of time?

Let me give you a real life example of what you are thinking of doing.

I'm currently doing exactly what you described, and I have missed out on quite a bit of the capital gain when the ES3 goes from 3.3 to the current 3.5 because I only buy when it's below 3.3. When a bull comes and push the general market higher, you will stay out and miss the whole bull run, by the next time you enter it would be at a higher range already. See the folly of trying to time the market?

Why I'm doing it is because it matches my other purchases of stocks. For example, I was buying banks when the market turns bullish. The 3 banks + singtel already make up quite a bit of STI, thus missing out on STI is compensated by my banks investment.
I would not suggest you to buy individual counter as you are new to this.

 

[alexchia01]

Hi all,

I'm completely new to this, but want to start investing my money in index funds so it doesnt get eaten by the inflation.

Been reading about DCA quite a bit, and i understand that proper DCA requires investor to put money in at the same time every month.

What are your thoughts if instead of putting money in on the same day, the investor waited a few days or even until the next month if when the index price is higher than his portfolio average at that point of time?

Dollar-Cost Averaging is not an efficient investment technique.

You'll get an average price, but not a better price.

In investing, we want to buy as low as possible, so investors must have a technique to spot low price.

Although, it's not possible, if not, super difficult, to spot the lowest price, but it's possible to spot below average price and that's what an investor must do.

FYI... The person who benefit the most when an investor uses DCA, is not the investor, but the person who sold the DCA product to the investor.

 

[prawncrackers]

Dollar-Cost Averaging is not an efficient investment technique.

You'll get an average price, but not a better price.

In investing, we want to buy as low as possible, so investors must have a technique to spot low price.

Although, it's not possible, if not, super difficult, to spot the lowest price, but it's possible to spot below average price and that's what an investor must do.

FYI... The person who benefit the most when an investor uses DCA, is not the investor, but the person who sold the DCA product to the investor.

Thanks all. I'm going to use SCB and try to DYI instead of using a DCA product.

What's a recommended way for me to do spotting / time smartly?

 

[w1rbelw1nd]

Thanks all. I'm going to use SCB and try to DYI instead of using a DCA product.

What's a recommended way for me to do spotting / time smartly?

Highly not recommend you trying to time "smartly". You think you are doing it "smart", but you may just be missing out in all the upside like what Perished mentioned.

Personally , I limit my market timing within a month (buy when I feel that the price is reasonable, if within the month price is still high, I bite the bullet and buy anyway at end of month ). Not very scientific and some may see it as a half-f**cked method lol, but I stay invested most of the time still.

 

[Perisher]

Dollar-Cost Averaging is not an efficient investment technique.

You'll get an average price, but not a better price.

In investing, we want to buy as low as possible, so investors must have a technique to spot low price.

Although, it's not possible, if not, super difficult, to spot the lowest price, but it's possible to spot below average price and that's what an investor must do.

FYI... The person who benefit the most when an investor uses DCA, is not the investor, but the person who sold the DCA product to the investor.

I have no doubt that one may be capable of devising a way to spot a low average price but this is for a newbie... for the average investor.

Unless you are willing to share the way to spot the low average price, don't see the point of you coming here and telling a newbie it's possible to do that, don't you agree? Just for discussion, not meant to offend.

 

[alexchia01]

Thanks all. I'm going to use SCB and try to DYI instead of using a DCA product.

What's a recommended way for me to do spotting / time smartly?

Use the 200MA to mark the average price.

If the price is below 200MA, looks for rebound to buy into the counter, bit by bit.

Once price crosses above the 200MA, stop all buying.

Please note... This strategy is for investors and long-term traders. If you are a short-term to mid-term trader, your strategy may have conflict with this. If so, I hope you can refrain from rebutting this strategy as it may confuse newbies.

FYI... 200MA is used by many professionals to determine Bull or Bear Market.

 

[alexchia01]

I have no doubt that one may be capable of devising a way to spot a low average price but this is for a newbie... for the average investor.

Unless you are willing to share the way to spot the low average price, don't see the point of you coming here and telling a newbie it's possible to do that, don't you agree? Just for discussion, not meant to offend.

1. I just shared in my previous post... because TS ask. I'm willing to share, but since before that, nobody ask, I don't have to share.

2. This is a forum, not a all questions must answer exam. If I ask you some questions and you don't feel like answering. So be it. I'm not going to talk nonsense about why and what you must answer and not.

3. I respect your views, so please respect mine. Just a discussion, not meant to offend.

 

[Shiny Things]

Been reading about DCA quite a bit, and i understand that proper DCA requires investor to put money in at the same time every month.

What are your thoughts if instead of putting money in on the same day, the investor waited a few days or even until the next month if when the index price is higher than his portfolio average at that point of time?

Ehh. Honestly, I do this occasionally, but I do it the other way around - if the stock has taken a tumble during the month, then I might buy some early instead of waiting for the usual date.

Holding off if the index is high isn't going to work, because on average stocks go up - if you hold off because the index is at its highs, then you'll end up holding off forever.

Really, though, I wouldn't try to be smart at first. If you've never done this before, then just do it on a regular date - get used to the idea of buying and holding.

Alexchia, this guy's trying to buy once a month. If he uses the 200-day MA, he's going to be sitting out of the market for months and months and months.

 

[Perisher]

2. This is a forum, not a all questions must answer exam. If I ask you some questions and you don't feel like answering. So be it. I'm not going to talk nonsense about why and what you must answer and not.

Ya... I understand what you mean.

Won't try to change your perspective.
Thank for sharing.

 

[prawncrackers]

Holding off if the index is high isn't going to work, because on average stocks go up - if you hold off because the index is at its highs, then you'll end up holding off forever.

Would it be a better idea to go in big with a lump sum then DCA in the following months or put in bigger sums at less regular intervals instead of spreading it out across months then?

Ya... I understand what you mean.

Won't try to change your perspective.
Thank for sharing.

thanks also to alex and perisher for ur expertise and trying to protect a newb like me from getting burnt! really my good fortune to learn from all of you i will read and research them to process my thoughts.

 

[alexchia01]

Alexchia, this guy's trying to buy once a month. If he uses the 200-day MA, he's going to be sitting out of the market for months and months and months.

Personally, I don't think it's a good idea to invest monthly. We should invest when there is opportunities, not monthly regardless of market condition.

At this time, US and Asia markets are already in the high, so opportunities have lessen in these markets is normal. But there are still opportunities if one is willing to look.

Now, I'm looking at Europe, oil related companies, selected Reits and Gold. Please note, these are what I'm looking at, there maybe more, it's up to each individual to seek their opportunities.

 

[alexchia01]

Ya... I understand what you mean.

Won't try to change your perspective.
Thank for sharing.

Thanks for understanding.

 

[silentears]

https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

http://www.moneychimp.com/features/dollar_cost.htm

We conclude that if an investor expects such trends to continue, is
satisfied with his or her target asset allocation, and is comfortable with
the risk/return characteristics of each strategy, the prudent action is


investing the lump sum immediately to gain exposure to the markets
as soon as possible. But if the investor is primarily concerned with
minimizing downside risk and potential feelings of regret (resulting from
lump-sum investing immediately before a market downturn), then DCA may
be of use. Of course, any emotionally based concerns should be weighed
carefully against both (1) the lower expected long-run returns of cash
compared with stocks and bonds, and (2) the fact that delaying investment
is itself a form of market-timing, something few investors succeed at.

Depends on market conditions actually lei. but different ppl different views due to different time horizon

 

[Perisher]

thanks also to alex and perisher for ur expertise and trying to protect a newb like me from getting burnt! really my good fortune to learn from all of you i will read and research them to process my thoughts.

I'm no expert, not even close, Alexchia and Shiny Things know way way more than me. But helping a newbie should not be beyond me. haha. Let's all learn together.

 

[Tornesoul]

Ehh. Honestly, I do this occasionally, but I do it the other way around - if the stock has taken a tumble during the month, then I might buy some early instead of waiting for the usual date.

Holding off if the index is high isn't going to work, because on average stocks go up - if you hold off because the index is at its highs, then you'll end up holding off forever.

Really, though, I wouldn't try to be smart at first. If you've never done this before, then just do it on a regular date - get used to the idea of buying and holding.

Alexchia, this guy's trying to buy once a month. If he uses the 200-day MA, he's going to be sitting out of the market for months and months and months.

it's somewhat comforting to know that you do deviate slightly from regular fixed purchases.

guilty as well.

ts, that vanguard article states that lumpsum is better. but end of the day, it depends which allows you to sleep better at night and which you are more comfortable with

 

[Shiny Things]

Personally, I don't think it's a good idea to invest monthly. We should invest when there is opportunities, not monthly regardless of market condition.

So that's fine for people who have time to monitor the markets, but most people don't. Most people have jobs, and lives, and better things to do than sit around thinking about market views.

For full-time traders like you (and like the person I used to be), it's fine to come up with investment views. But the average person is going to be trading at random - they don't have any advantage when it comes to picking sectors or single stocks or market-timing or anything like that. The best bet for the average person is just to be methodical, and that means monthly (or however often you get paid) dollar-cost averaging into index ETFs.

Would it be a better idea to go in big with a lump sum then DCA in the following months or put in bigger sums at less regular intervals instead of spreading it out across months then?

Smaller sums at smaller intervals is the best bet, as long as your transaction costs are reasonably low. Paying $25 per trade if you're only buying $100 a month is a disastrous idea.

That's why Stanchart is so good - they don't have any minimum fee, it's always 0.2% or whatever.

 

[bakuten]

everything has pros and cons.

Just remember that, when it rains(when crisis hits), when everybody is scrambling for safety as their gunpowder got caught up in the rain(investments)....Every little bit of dry gunpowder(cash) you have on hand will come a long way.

So, holding some cash in hand is vital. It would be real sad when opportunity knocks and all you have is wet gunpowder.