Was it a mistake to buy silver now?

You've proved my point. Your example is short term and contains a 50% drop from the original price. In that case, and only that case, DCA beats lump sum investing. If you expand this to a 25 year period where the price gradually rises from $10 to $50 with a few 30% drops in between, the buyer at $10 will come out ahead of the DCA investor.

 

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OK, so two people with different views on DCA can construct a scenario where their theory wins. My takeaway is that if you start out life with a lot of money to invest, invest it all at once and take advantage of the market that always goes up. For the other 95% of us start investing when you begin your career and get on a plan to add to your investment at regular intervals.

Official off topic comment: At this point in history with all of our problems with oil, we have a huge glut of clean and green natural gas and enough domestic reserves to last 100 years. Yet natural gas is really in the dumpster these days - may even remind some people of the days not too long ago when the could pick up silver rounds all day long for $5 an oz. Just saying...

Regards,

Bluesboy65

 

If you like DCA, use it. There are worse techniques. But people both overrate the result they will get, and underestimate the psychological difficulty of adding money to the program when the market is down sharply. And if the market falls, say, 10 years into the program, the financial loss can be substantial for a program that was billed as conservative. I just want people to think about the pitfalls before they buy into it.

Natural gas is okay, but oil might be a better investment because it is less plentiful.

 

I love DRIPs!! I have a COMCAST DRIP that's done quite well.

 

DCA is the outcome of the only practical method of investing for most people. I think both DCA and lump sum investments are viable rational options for those in a position to choose between the two. As always, it's good to have a public debate - the exchange of ideas is what makes CoinTalk so great!

Regards,

Bluesboy65

 

Okay, I think we've established that DCA is inferior to lump-sum investing, assuming:

1) You have the lump sum to invest up-front.
2) When you choose to DCA, you keep the balance of your money (until you invest it) in a non-interest-bearing vehicle.
3) The vehicle in which you're investing rises in value in a certain pattern during the DCA period.

 

Granted, this is a simple example to illustrate a point, but I think you're wrong (and you know I NEVER say to you!!). Let's just take this example out to four (4) months; we sell at the market high of $20/share...

B&H: 50 shares @$20/share or $1,000
DCA: 45 shares @45/share or $900

You win! ...right? ...well, maybe. How any investors you know can sell their stock just after it doubles...not many I'll guess. Once it comes back down...they're screwed!

My Father always told me, "Timing the market is a fool's errand"; he always tried to teach me the difference between "investing" and "speculating".

The best advice I can offer a novice "investor" just starting out is to Dollar Cost Average. The market will automatically buy the majority of their shares at the lower price and fewer at the higher price without having to know how to time the market...(jmho).

 

I've only scratched the surface of the problems with dollar cost averaging. Perhaps the biggest hurdle is psychological. Someone can put in $100 per month for ten years as the market works its way higher, then have the market drop a terrifying 40%. Suddenly, the investor is sitting on a loss of many thousands of dollars and is being asked to continue to add money. Everyone thinks they can handle this, but far fewer can do it. All things considered, I think an intensive study of value investing is better than relying on a formula plan to protect you. Oddly enough DCA is speculation, not investing, because it is based on price movements to succeed and not on the value or expected return of the underlying investment

Regarding timing, there are several very good methods to do this despite what you have been told. A few of the best are contained in this book. http://www.amazon.com/How-Make-Stoc...=sr_1_1?ie=UTF8&s=books&qid=1298255789&sr=1-1. It's an absolutely terrible title for a book, but it's an easy read and contains some extraordinarily valuable formula investing information that goes quite a bit beyond DCA. I highly recommend it to anyone who is interested.

 

Thanks! I'll give it a read...:bow:

...and you're right...Dollar Cost Averaging requires you to..."Set it, and FORGET it"!

 

The 2nd reviewer touted how well he did with VTSS by buying and holding. VTSS reached a high 2/2000 of $115 and then dropped to 9 cents in dec/2009. Wonder how long he continued to hold it.

 

Would you trade your stocks for silver today ?

Pep

 

That's the point. Everyone can dream of how much money can be made by buying and selling at exactly the right time; but only a very few lucky people can do it. The book provides a couple of ways to successfully navigate market fluctuations in a portfolio or mutual fund. Most people will never do better than this.

 

Both have a place in a portfolio.

 

Not so much what you pay for something as how much you sell it for. And that is all in timing. If you never place yourself in a position where you are forced to sell, then you can never lose. IMHO

 

There are expenses/risks associated with holding physical PMs that shouldn't be overlooked. Space, security, and environmental hazards are a few that come to mind.

 

At almost $34 an ounce probably not but I felt the same way when I bought at around 17 last year.

 

On the day you purchase something, you don't know what it will eventually sell for. So all you can do is make sure you are happy that you are receiving fair value [or better] for the price paid. In my case, I haven't purchased any silver since the price went above $20 because there isn't a margin of safety in the price. Others may differ in their comfort level.

 

If a person is truly serious in investing in PM, you must be able to buy and sell reasonably fast enough in case of rapid market movement. I would suggest a 2 fold approach. Maintain your personal physical PM with a mental sell this when over xx.xx price, and have a broker account to use silver ETFs to work the top. This way , only a portion is at reasonable risk at one time, and quotes/shipping delays don't enter into the picture. I have some physical PM in nice coins that may some day reach PM level to sell and buy non-PM collector coins, or to reinvest, but they don't enter my mind until the price approaches their trigger. $34 seems high, but it would be a nice investment if one thought it would go to $36 or more in a short time. Not for everyone I agree, but probably many are doing it.

Jim

 

Good strategy and congrats on your recent technical buy.

Regards,

Bluesboy65

 

Thanks, mainly luck, but I am now playing with market money.