World Indices Roundup 2019

Definitely does your head in. So much analysing and over thinking only to come to the conclusion that the best strategy is to keep it simple.

 

The earliest I could find was Jun 01, 1992 ASX200 was 1,700.50

But then I also read this

Wiki

 

True to his word:




Friday night, a few beers, meant in good faith

 

Dunno's post hits the nail (very firmly) on the head! To me DCA is the way to go, and I go against the recommendations for lump sum investing and plan to stick with DCA of some extra cash from real estate. My arguments for DCA vs lump sum investing or trying to time the market when you have money to invest:

1. SANF: If you lump sum invest you are setting yourself up for stress - if the market goes up you are worried about a crash, if it goes down you hate yourself for blowing all that money away because you didn't listen to AFR headlines / hedge fund podcast / chartists / traders / taxi drivers talking doom and gloom.

2. The numbers don't really support lump sum investing if you are loss averse: I've read a lot on this, and you always see that "on average" lump sum investing results in better outcomes. That is true, but by DCA you are potentially significantly reducing the downside risk during the DCA period.

Here's a couple of histograms of outputs comparing the simulated results of 5yr DCA starting with 20% US stocks and 80% Short Term Treasury Bonds vs Lump sum investing into 100% US stocks. Starting amounts for all are $100K with no additional funds added:



And here's the drawdowns



Links here and here to the models. No fees, tax etc. accounted for. Monte Carlo simulations have their issues, but I think they are useful.

This makes it somewhat clear to me that if you want a shot at getting rich quicker, or the money you intend to invest is not the be all and end all for you, then the lump sum method is far better. However, for loss aversion during the 5yr period the DCA approach is superior, and psychology tells us that this is what screws up investors. DCA also holds the advantage of bring able to invest heavily IF there is a large drop in the markets, for example 20%+ over the period. Taking that into account you could argue that DCA holds potential for superior returns. You could set a simple rule that when the market drops by X% (or if you like it when the waves spoken about in this thread tells you it is a screaming buy) you invest an additional X years worth of money, shortening your DCA timeline. I personally must have binary rules that leave no grey area or I know I will meltdown. Having rules takes most of the worry out of it for me, you follow the rules and ignore everything else. The simpler and more robust they are the harder they are to talk yourself out of.

@Big Al maybe this sort of strategy is something to think about. That way you can have a simple rule if you feel you must time the market but also feel like you're not missing out by sitting on the sidelines.

Definitely not advice, I am just a random person with no finance training trying to figure out this whole investing nonsense. All I know is that if you listen to any of the older, well-known investors they all have graduated from "I know better than the markets" to "I can't beat it". Warren Buffet is fascinating with this - his earlier meetings were almost scoffing at index investing, but for a long time now he's been saying it's the best way.

NOTE 1: The part I struggle with is when the DCA ends. If you've DCA into the market it implies that you are worried that there will be a downturn over that period for some reason. If it doesn't happen you have returned less than you would have by lump sum investing BUT you may feel like the downturn is even closer hence more stress. This adds another layer of psych issues, but by then hopefully you will have saved additional funds to further invest OR are comfortable that the money you have made over the DCA period means that a loss of 20%+ is still ok.

NOTE 2: Substituting a PPOR mortgage offset that is debt recycled for investing instead of the Bonds may give you a somewhat guaranteed rate of tax free return so may be a better option.

 

I am very impressed by the level and depth of knowledge from the members on this site. The shares and market threads seem to have more level headed and balanced discussions then some of the topics on whether property is going up or property is going to crash arguments.

Considering the posts on here are not from experts or people with formal education in this field, they sure make a lot more sense then some of stuff I read from the so called experts and economists.

 

Sharesight had a good comparison of DCA and Lump Sum investing on their blog.

What’s better: Dollar-cost averaging or lump-sum investing? | Sharesight

Results:

 

Over the years I have started to more and more believe and trust advice of people who have already traveled the path I am planning on traveling.

Their experience and wisdom is priceless. The likes of @Nodrog and @dunno have always given the best advice for people to achieve financial freedom at the lowest risks. They talk from their experiences and without any agenda or incentive teach people about avoiding costly mistakes.

Big thanks to both of them and many others who keep sharing their wisdom without expecting anything in return.

Cheers
Oracle.

 

This is the first of a few posts I'll do as time permits. We're painting an IP in Brisbane at the moment and we're (way) behind schedule.

Here's a chart that was prepared in May 2019 that was used to explain what I was expecting the DJIA to do going forward. The chart is purely conceptual and does not show precise price points or the durations of waves or the dates when future turning points are reached. It was simply intended to show the form or pattern that the DJIA could be in - a fourth wave expanding triangle.

A triangle formation is bounded by upper and lower trend lines (dashed red lines on the chart). It forms a series of overlapping waves going forward in time. In the chart these are shown as waves A, B, C, D and E. Wave A was the first wave down and this commenced in January 2018. Waves B and C followed with wave C ending in December 2018. The ends of waves B and D fall on the upper trend line. The ends of waves A, C and E fall on the lower trend line. There is some further detail I will not go into, except that E may overshoot or undershoot the trend line.

The chart showed two options for how wave D of the triangle in DJIA could develop: 1) a(()) (or ((a)) ) - b(()) - c(()) or 2) w(()) - x(()) - y(()). It is not materially important what the detail of all this means.

The recent dramatic turning point could be the end of wave D and the start of wave E. Wave E will end below the December 2018 low of wave C. At the highest level wave E will subdivide into a three wave corrective formation. It is assumed to be a zigzag and shown as a(()) (or ((a)) ) - ((b)) - ((c)). If it's a zigzag, ((a)) will then further subdivide but into five, b(()) into three and c(()) into five. This subdivision continues on as waves are fractal. The subdivision of a(()) into five may be what is underway now. If so, the first wave (down) of the five has ended and the second (up) has started.



Triangles only occur in certain positions, one being fourth waves in an impulse i.e. a 1 -2 - 3 - 4 - 5 (in rising or falling markets). The simple diagram below shows an impulse in a rising market (in a falling market it goes the other way) and does not show how each wave subdivides.



When wave E finishes it will end the wave of larger degree wave (4). Wave (5) shown on the chart made up of five sub-waves will then occur. The end of wave (5) denotes the possible start of the next bear market of a scale bigger than the last (2007-2009).

This is only one of a number of alternatives but is the preferred alternative I'm assuming to be in play.

I hope this helps.

 

Even God Couldn’t Beat Dollar-Cost Averaging

God Still Has the Last Laugh

Historically, if you have a windfall, lump sum investing has been better than DCA.

 

That’s an important point.

DCA over market timing for accumulation every time but if you are faced with an unexpected lump sum then dealing with it is a potential regret dilemma. Lump sum is theoretically best by law of large numbers, but you only have a single case and if you are unlucky the opportunity cost kicks like a mule in the short term. If you are going to DCA it needs to be over an extended time (think decade) otherwise you are simply slow-motion lump summing into a single phase of the market. If ever market timing strategies were to be considered, dealing with unexpected liquidity events would be the time. But the math says “on average” market timing attempts are worse than the average of random entries by the amount of the costs associated.


........................................................................................


I don’t wish to dissuade people from trying to understand the fundamental drivers of markets and make a reasoned decision for themselves on timing if faced with a lump sum dilemma and they really can't face a potential poor outcome from a random lump sum entry.

But:

If somebody says they can predict the future for you…………

If somebody is offering to predict the future for you for a fee (without providing a performance guarantee if they cost you money by getting it wrong).……..

If somebody is packaging their predictions in complexity and secret methods that they will explain for exorbitant costs ………………

Putting yourself continuoulsy in the lump sum dilema by ongoing market timing is just stupid in my book. But many don't agree, everybody has to make up their own mind.

​

 

Lump sum vs dca can be a thread on its own. Your post above has summed this up perfectly.

As this is mainly a property forum I feel many on here are holding large amounts of cash from sales/debt recycling strategies or transitioning to a cashflow strategy using shares.

The psychological aspect of lump sum buying vs dca, along with which way is the markets going has been the hardest challenge without doubt. Buying property is purchased in one go from the start, but shares are usually an on going purchase as one continuously invests along the way. But for those others, your post above or a thread on its own could really help.

Cheers.

 

Bugger, now you tell me. You saying all those surfing lessons I’ve been taking to get ready for the mother of all Waves have been a waste of time?

 

Seems to be the case.

Take heart. It's highly probable you're not a member of an exclusive club. Many members are sitting on a pile of cash waiting. Some since 2007, some since 2018 or those who are presently filling out the membership application form.

 

Maybe not. As @SatayKing alludes too, you don't need to time the markets, which ironically places you best to attempt it.

Just like those that don't need more money are best placed to make it.

Capitalism has many ironic attributes.

 

Being silly as usual in case somebody mistakingly takes me seriously.

I’m not sitting on much in the way of surplus cash other than what has been part of our longer term plan in line with our “conservative” approach given we’re in the earlier stage of retirement. The previous 12 months has still seen significant additional accumulation inside and outside Super using cash surplus to our SORR strategy.

Getting back to lump sum vs DCA apart for the psychological aspects I think it can also depend on where the investor is in their investing lifecycle.

Of course if one is wealthy enough much of what is discussed here at times doesn’t matter.

Re surfing the lessons don’t seem to be helping:

 

To me that's a really dodgy article. It picked the perfect time to start DCA (i.e. just before a massive drawdown). Start a year later at the end of the drawdown period (i.e. depths of the GFC) and the result would be massively against DCA. Funny that a company that makes money from trades would recommend multiple trades vs a single one.....

Agree 100%. I DCA via super and love it, and wouldn't consider stockpiling cash over time in the hopes of market corrections to invest. Just look at the 1990's, you'd wait the whole decade and miss out on 500+% gains.

On average lump sum investing can be a better method when you consider no other factors. Averages are very misleading though when data is skewed as it tends to be when looking at market returns. I'd prefer median or even better histograms and percentiles to get a better idea of the data. If I had the time I'd look at lump sum vs DCA outcomes relative to market valuations, that could make a big difference to me I think as it would remove half of the likely positive results if you excluded any start point that is below long-term average PER or CAPE. Disclaimer I have no idea - but to me the ASX is roughly fair value or better and the US market is potentially fair value or worse, which may impact lump sum investing. Therefore psychologically it makes sense to do a long-duration DCA for this money outside super.

I agree - I've taken this thread off track a bit I think.

 

Lump sum vs DCA taking into account the CAPE:
The Lump Sum vs. Dollar Cost Averaging Decision - A Wealth of Common Sense

 

Thanks for the link! Interesting results.

That seems like a small sample size though as limiting to only CAPE over 32 is really the extremes of the market. I'd guess those positive values might be skewed by the extended period >32 in the early 2000's. The other issue is the short timeframe - CAPE seems to be bad for short-term return and better for long term return prediction.

Food for thought though.

 

XJO next resistance approaching at 6,620 - 6,630, will likely be sold off again from here into a minor degree wave 5 down that will take out the 6,444 low and complete this first impulse lower.

Take a look at the recent volume activity on hedging vehicles.....dead give-away as to what is really going on right now Smart money is hedging out BIG NOW (in fact they have been accumulating a hedge position over many months but the recent spike in volume was the major buy in!)

BBUS


BBOZ


No advice

 

So Alex do you think they might be worried about the 90 year cycle from the great depression, amongst others