Dollar Cost Averaging

I am not a silver bug, but the only thing I see wrong here is your continued use of the term DCA. You are not dollar cost averaging when you are also hunting coins out of rolls, and taking advantage of various other buy and sell moments. Yes, the above quote looks like DCA is happening, but from other posts you are doing other stuff as well. I'm not saying that's the wrong way to invest, far be it from be as a non-metal guy, but I would stop trying to call it DCA when you're not. Just call it "my average buy price of silver is $xx.xx" and be done with it.

 

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This guy could have been sitting on silver for a long time. If he was getting it at$6.00 an ounce or cheaper he my not care too much about what it is right now. He's an older gentleman that says he is trying to "liquidate".

 

I think you're right. I am pretty much tracking my average buy price and using my Coin roll Hunting finds to drive it down.

 

I'm arguably the worst financial advisor of all time. That said, Dollar Cost Averaging is generally a misnomer when it comes to finance.

All the success of DCA in terms of mutual funds comes from systematic investment and the general design of mutual funds. As JeffB stated, when you sell, you're selling units, whereby you buy dollar amounts. This is why it seems to work for stocks/mutual funds. People convince themselves that they have more shares than they would have had if they just bought while attempting to time the market.

Now, my argument is a bit different. If you're going to invest $10k, history tells us that you're better off investing all $10k today than you are investing $1k each month for the next ten months. Why? The market is historically up.

DCA advocates will show you a chart where your $10k investment today goes down to $7k in four years, then back up to $10k six years later, yielding a $10k current and future value. They then show that if you had invested your $10k over the 10 intervals, you'd have bought:

$1k @ $10 a share (100 shares)
$1k @ $9 a share (111.11 shares)
$1k @ $8 a share (125 shares)
$1k @ $7 a share (142.86 shares)
$1k @ $7.50 a share (133.33 shares)
$1k @ $8 a share (125 shares)
$1k @ $8.50 a share (117.65 shares)
$1k @ $9 a share (111.11 shares)
$1k @ $9.50 a share (105.26 shares)
$1k @ $10 a share (100 shares)

$10k investment resulted in $11,713.20 (1171.32 shares @ $10) in 10 years due to DCA.

Of course, they fail to consider that the mirrored scenario could have happened:

$1k @ $7 a share (142.86 shares)
$1k @ $8 a share (125 shares)
$1k @ $9 a share (111.11 shares)
$1k @ $10 a share (100 shares)
$1k @ $9.50 a share (105.26 shares)
$1k @ $9 a share (111.11 shares)
$1k @ $8.50 a share (117.65 shares)
$1k @ $8 a share (125 shares)
$1k @ $7.50 a share (133.33 shares)
$1k @ $7 a share (142.86 shares)

$10k investment would have resulted in $8,499.26 (1214.18 shares @ $7) in 10 yearss due to DCA.

Given the historical growth history of the S&P 500 (which is tainted in its own way), if you invest $10k today, your expected investment value is $20k 10 years from now in today's dollars (7.2% adjusted for inflation).

Assuming even the most random scatter plot of growth models, DCA falls short of full initial investment something on the scale of 68% of the time. Of course, no financial advisor will EVER tell you that for two reasons:

1) If they told you that you're better off investing in a broad market today than through some systematic structure, you'd think they don't provide a service to you.
1a) They want to feel they're earning their money.

2) The concept of DCA simplifies the concept of investing, where systematic investing gets redefined as DCA, and you (the client) feels more comfortable with the ACH that comes out of your account for $1k every month to add to your investment portfolio.

So, in summary, it's not DCA that breeds success over the long run, but rather systematic investing. If you keep investing the same amount (or more, as your income grows) each period, your portfolio will grow over time, as you'll ride out the bumps and dips. This isn't the same as DCA, even though most (all?) DCA advocates will try to tell you that it is.

 

I ran a DCA scenario for silver on an excel spread sheet. If I spent $350.00 a month, every month this year so far on the 7th of each month paying a $1.00 premium for each ounce I would be at a loss of $270. My average cost per ounce would be $17.91. Spot right now is $16.65. Anyone have any thoughts for or against this?

 

Just buy 800,000 ounces at spot and sell them all later that day at spot + $1.25. Take your million dollar profit and retire. Sounds easy.

 

Seriously this DCA stuff is overblown. Isnt that what everyone does anyway ? You buy more when you have the money and want to get some ? That in a way is DCA. If spot is lower then your current average price which means your currently down therotically ( no one is ever down, just read the boards) then yes you can buy and lower your DCA but at that point you will ALWAYS be down more than you were beforehand -- ALWAYS. You simply have spread your theoretic losses out amongst more ounces so you are down less PER OUNCE but you will ALWAYS be down more. ( yes assuming you aren't buying below current spot ).

The point Im making is that DCA is just a way of making people feel like they are "catching up" or something like that when in fact they are not. Just keep buying when you have the available funds and want to put it in silver or gold. Hold it and in time you will win.

This DCA myth is not going to be the reason you make a profit in the long run. You buy and hold until spot finally recovers, which it will. I would not get boxed in by DCA where you think you have to buy on a certain date, or spend the same amount, or only buy when spot is down.

 

I bought 100 ounces at $40 an ounce way back when.

Yesterday I bought another 100 ounces at $18 with the premium.

My DCA used to be $40.00 but in 1 day I got is down to $29.00. Im so smart.

At current spot of $16.50 I was down $2350 but now I am down $2500. Im confused.

 

Im sorry but the silver side never fails to make me ROF + LMAO. So back in September when silver was ~ $20.00 this guy was claiming he was buying for $20.08 an ounce ( 14.5 X face/ 0.722 = $20.08 ). Now that silver has collapsed his story is he "bought it at $14 and sold it all at $17.50 for a nice profit".

 

Thanks or trying to make me look bad. If you want to do that read the entire thread to understand what is going on. I Coin Roll Hunt halves to keep my average cost per ounce down. So I Coin Roll Hunt and purchase at retail. I am new to this and wanted others opinions. I believe DCA as applied to silver is not wise. I came to this conclusion after running a model scenario on an excel spreadsheet. I have not been Dollar Cost Averaging as someone pointed out, just looking at my cost per ounce.

 

So let me bring this around. Dollar Cost Averaging works over LONG PERIODS OF TIME.

In 20-30 years we can *almost* be sure that metals will substantially appreciate. So buying every month like clockwork guarantees that whatever highs and lows you buy at will average out.

Over time you will develop a dollar cost average. But TIME is the enemy of the short term investor. If you are averaged at $19 and it drops below, the only choices are: Buy more to lower DCA, buy none and wait it out in hopes of a rise (not DCA) or sell and lose.

BMan33, I admire your tenacity in this, but you would not be the first to attempt to make money in metals. But you can't run a DCA strategy in a couple of months and just hope it works.

Believe me, many before us have tried.

 

DCA optimizes your chances of getting the most for your money in an unpredictably fluctuating market. But it's still chance, not certainty.

DCA will do nothing to overcome a stiff buy/sell spread. But pointing to spread losses as a flaw of DCA is just goofy. They're a problem with every investment schedule.

 

The basic investment strategy here is ok but some of its parts are flawed. Instead of DCA I call it CPOA(cost per ounce average). Obviously keeping your CPOA as low as possible is key. Goals and parameters need to be set. The best scenario for this is a mid- long term goal with an underlying theme of investing in silver(real money) as a hedge against inflation, a weakening dollar and wealth preservation. If you are going to buy one month then sell the next this whole concept is irrelevant since your only short term investing. Silver can be volatile and STI in it is risky. Keeping track of your CPOA is still important to know if your making a profit. Now if your going to commit to a longer time frame there is only one thing you need to do and that is to only BUY ON THE DIPS. Setting a specific day to buy each month is BAD advice, your leaving your purchases to random chance instead of controlling your purchases. Having a set dollar amount is ok but hold on to it in case a month goes by when prices are to high to buy. Again, "ONLY BUY ON THE DIPS". Shop around to find the lowest premiums over spot. The smaller the size the more you will pay for a premium. 100oz bars are best, premiums can range from .39-.79 on the better deals. Have set limits on the premium you will pay. Also have a set "buy price" when silver dips, if you watch it several times a day or more you can start to get a feel for the bottoms. I have put myself in a position to where it doesn't matter if it goes down or up. If it drops I smile since its a great time to buy more. If it goes up that's great as well. I have a set point at XXXX dollars for when I will sell and its an amount of ounces that is set apart for just such an occasion. The dollar is worthless it is NOT money, only gold and silver are real money. A govt. that continues to print 85 billion in fiat currency a month and nothing to back it up will soon go bankrupt. Personally I think its amazing that I can take a worthless piece of paper and trade it for gold and silver!

 

I agree with what you say about CPOA. That is essentially what I am doing. I don't purchase on a fixed schedule and shoot for the dips. I bought ten ounces at spot last month at $16.66. Thought it was a good deal because I paid no premium. Premiums usually being a dollar an ounce my logic was it's like I bought at $15.66 an ounce. Supplemented with my coin roll hunting my CPOA is $7.67 an ounce. However a lot of that is 40%. I have to calculate that as a discount.

 

You see that the price has dropped thirty cents so far on a particular day. Tell me -- is this a "dip", or is it the first part of a two-dollar slide?

Once you can answer that, without waiting with the rest of us, you're all set -- because you can predict the future. I'm happy to admit that DCA doesn't work as well as consulting a reliable oracle.

Or, to put it another way, what you say here sounds like good advice, but isn't actually possible.

 

Optimizing your DCA through critical thought, processes and opportunities.

Gold falling through floor - I bought (2) gold sovereigns today that have a melt value of ~$280 right now with gold at $1170/ozt.

Paid $310ea total $620

10% Ebay Bonus Bucks - $62

2% cash back on CC - $12.40

Net price for both - 620-72.40 = $547.60 or $273.80ea

Delivered.

And I've got money in spare for the next drop - we'll see.

 

Well Mr. helper, if you actually pay attention to the price of silver it is possible to get a feel for the low end of the dips. But as your sarcastic tone implies you really don't pay attention to the details. Knowing where the absolute bottom of a dip is anybody's guess. But if you cant figure it out let me help you. On Nov. 10th spot was $18.60 today it was at 16.80, Guess what? That's a dip! Pretty sad I had to explain that one to you. Capiche? Here's another one for you, Sept. 6th spot was $20.06 right now its $16.90 Guess what that is, come on you can do it. Try doing some research and look at a chart once in a while instead of going onto forums and acting like a fool.

 

Here, have some "dips".



I've circled some; you can pick out others.

I generally hear people talk about dips as short-term decreases, followed by recoveries. Problem is, you can't tell when or if that recovery is going to come. From the perspective of someone who can't foresee the future, each of the features I circled looks like it could be a "dip".

I say this as someone who did buy several of the "dips" descending from 2011's highs. I learned my lesson. If you seriously think you can "get a feel for the low end of the dips", and consistently guess which ones are dips and which ones are drops, you haven't learned yet.

 

Yeah I did pretty well a few years ago using this method when I had bonus bucks. I was using them mainly with gift cards like walmart that I was going to use anyway. I remember having like $400 total WM gift cards for net cost of maybe $300. My problem with ebay is the prices go so high and its hard to find a good deal on a coin then If I do find some gold cheap I get worried that there must be a reason no one bid. Is it an "obvious fake" to everyone except me ? I don't know but I got away from Ebay as generally the prices close out 10-15% higher than what I can get it for at JmB. But yes that's a good deal $310 for each sovereign and then all the discounts.

 

Right now the best price I see on eBay is $17.82 per ounce (.999) from JM Bullion on a lot of 10 rounds. That is $0.89 over spot per round.