Comments on: Dollar Cost Averaging vs. Value Averaging

By: Budgets are Sexy

Budgets are Sexy — Mon, 20 Oct 2008 01:33:11 +0000

Great post! I never hear of “Value averaging” all that much, so it was cool to read about something new to me. well put

By: Writer's Coin

Writer's Coin — Wed, 15 Oct 2008 23:03:56 +0000

This is a great resource for those that want to read more and see the plans in action:

http://www.studyfinance.com/jfsd/pdffiles/v13n1/marshall.pdf

By: Writer's Coin

Writer's Coin — Wed, 15 Oct 2008 22:33:38 +0000

Interesting alternative to DCA—I had never heard of it. While it does come across as market timing in sheep’s clothing, there is something “automatic” to it that keeps it from feeling like market timing. Definitely worth a shot.

By: Dividend Growth Investor

Dividend Growth Investor — Wed, 15 Oct 2008 14:19:18 +0000

I guess with value averaging you try to time the market by trying to buy low and not buy when it’s high. The problem is that during bull markets the prices only keep getting higher.. And in bear markets the prices keep getting lower.

I think that dollar cost averaging should work best for most people. Just set it, put it on autopilot and forget it.

My man from disciplined investing just published an article about returns of investors who time mutual funds versus buy and hold a simple index fund..

http://disciplinedinvesting.blogspot.com/2008/10/market-timing-dangers.html

By: Ryan

Ryan — Wed, 15 Oct 2008 02:58:24 +0000

Laura: I think that could bring in better returns over the long run, but you need to keep in mind that it may take a couple weeks for the changes in your 401(k) to take effect (while waiting for the next pay period).

Donny G: Good point – and definitely not the way to go. I just go after asset allocation coupled with low fees.

Jarhead: Yes and no. If you follow value averaging by the book, there could be times when you don’t contribute anything, or times when you contribute multiples of your normal contribution. I don’t think it is something I would follow to the letter, but in times when the entire market is down (such as now), I would consider upping my contributions if I could afford it.

By: Alisa

Alisa — Wed, 15 Oct 2008 02:44:29 +0000

Thank you for the insight. I guess as an investor you have to really monitor the performance of your portfolio and decide what works best for you. Be well.

By: Jarhead

Jarhead — Tue, 14 Oct 2008 21:54:35 +0000

Couldn’t value averaging make you invest more or less depending on the market then you plan?

I.E. I you start with $1000 in Jan and you want it to average $1000 /month if the market falls every month. Or if it goes up every month you are only putting in 800-900.

Or do I stop when I hit my limit or contribute more if I haven’t reached my limit?

By: Donny Gamble

Donny Gamble — Tue, 14 Oct 2008 17:55:37 +0000

A lot of people who just put money into their roth ira’s or mutual funds don’t really implement these two system currently. They just put their money in the most profitable mutual fund that has been giving the highest rate of return. They almost never choose the proper fund that they should choose.