Dollar cost averaging only works when you start investing. Lets say you put $20,000 per year into an account. Then at age 50 you have $500,000. The market tanks 50% and you now have $250,000. At that point dollar cost averaging is not going to save you.
Now let’s look at buy & hold.
In 2000, the S&P was 1500 and change. Right now its about 900. So after 9 years, you are now down 40%. To make matters worse, you need 67% to get back to even.
This is why it would pay you to find a good timing system and stick with it.
Want more? The janpan market was at 39,000 around 1990. Now its 9400 – down 76% from 1990. 19 years and you are down 76%. Now you have to make 314% to get back to even.
Say it can’t happen here ion the U.S. In 2000, the NASDAQ was about 5000 – its currently 1752 – down 65% after 9 years.
Face it – Buy & Hold is a myth started by the mutual fund companies. Its a lot easier for them when you just keep giving them money so they can collect fees. And don’t believe the BS that you can’t time the market. You can!
The only way to make money over the long term is making returns and PRESERVING CAPITAL which you’re not when you buy & hold and take a 40 or 50% hit.
–Vics
