Hey Everyone - Thanks for watching. After this video, you might want to check out my video comparing Dollar Cost Averaging vs. Lump-Sum Investing. Here it is: ruclips.net/video/V0m8r2Ft7kY/видео.html Also, if you liked this video, please considering subscribing to the channel for more content and leave your comments below.
This blew my mind! Market dips are just opportunities to grab more shares at a discount. And if you stick to a low-cost index ETF, you have virtually zero chance of losing your shirt because the market is always going up in the long run
Great video. In a twisted sense it’s not the end of the world if you’re in the red during your accumulation phase. Then hope the market shoots upwards the end of your accumulation.
Absolutely! During the accumulation phase it really doesn't matter what order the gains and losses happen. But, we can feel good about wha the market does over longer periods. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023. In the past five years it has averaged 15.75%. The past ten years it averaged 12.07% The past 20 years, it averaged 9.69% The past 30 years, it averaged 10.16% And the past 40 years it averaged 11.37% And it's up around 14% this year already. But those are only the returns if someone stayed completely invested throughout those periods of time. Thanks for checking out the video and the comment!
Great! I'm happy to hear that it helped you better understand this concept. It's so important to manage our emotions and avoid making mistakes when the market goes through a correction or extended downturn. Thank you so much for the comment and for checking out the video. If you're interested, there's another video that might be helpful in avoiding other mistakes: The 20 Most Important Investment Rules & Lessons Every Investor Needs to Know. ruclips.net/video/WxEYYZSo4wI/видео.html
I'm really glad I watched this. I've been waiting for the market correction, and had no idea significant dips only happen once a yr or once every three years. Plus, I really like that the three scenarios are visually graphed out to show that continuing to invest even when the market goes down yields more shares owned. Thanks!
This was brilliantly put together. I’ve been following your videos for months now and with professional help, I’m making outstanding progress with my money decisions.
Hello Akina - What were you investing in that caused that? Investing should always be thought of as a longer term venture. I'll be making some other videos soon about how to invest, but you might want to check these two out. ruclips.net/video/FqKCDqcOqWg/видео.html ruclips.net/video/-wbxq54LkLw/видео.html
Hello Honath - Everyone can feel a bit green in the beginning, but it's important to get started and stick to it. It does worry me to hear someone say they do some speculation when it comes to investing. I'll be doing some more videos soon about how to invest, but you might start with these two. One will help us avoid some common mistakes and the other talks about investing and becomeing financially independent. ruclips.net/video/FqKCDqcOqWg/видео.html ruclips.net/video/-wbxq54LkLw/видео.html
Nice way to illustrate DCA. I will share this. (Maybe write up in the top right hand corner the amount invested was $2400 over the period so the returns gain overall could be visualized easier)
Thanks for watching. I'm in the process of creating a new video on this topic. I'll try and remember to add your suggestion. Hope to have it up within a week. Hopefully, it will be a good one to share with people, too.
Simple and concise, everyone needs to see this to help them overcome their fears in a down market. I got a late start saving for retirement, but I've always understood the advantage of DCA. I started saving for retirement in 2012 and, even now with the market down over 20%, I haven't changed a thing. Market slumps like this are a golden opportunity for the long term saver. This is when real wealth is created. I plan to retire in 10 years with more than enough savings to have a carefree retirement.
Not at all-most people aren’t working with a lump sum to invest; instead, building a habit of saving and investing monthly is key to long-term financial success. When you do this, it’s best not to worry about the market’s ups and downs over any month or even a year or two. Take a long-term view and focus on investing regularly. Studies consistently show that people who try to time the market often underperform it in significant ways. I recently made a new version of this video if you're interested, along with one comparing lump-sum investing to dollar-cost averaging (DCA), showing that lump-sum tends to win out. You might also find some of my other videos helpful on how to avoid common investing mistakes-I'll link a few here for you to check out! Thanks for checking this video out and the comment. Lump-sum vs DCA: ruclips.net/video/V0m8r2Ft7kY/видео.html Another DCA: ruclips.net/video/QVUqNbvaGWI/видео.html Most Important Lessons in Investing: ruclips.net/video/WxEYYZSo4wI/видео.html How To Invest BETTER And Avoid STUPID Mistakes: ruclips.net/video/FqKCDqcOqWg/видео.html
@@pharaohsmagician8329 Not in the slightest. If you have a long time horizon before you'll need your portfolio, there is no need to fear a down market...just keep investing.
Yes, that discussion could be interesting for some. However, the reality is that most individual investors don't invest significant time in learning and applying technical analysis and probably shouldn't attempt doing that. Many of the most common mistakes they make occur during market corrections or extended downturns. For the vast majority of individual investors, attempting to time the market is not advisable. This video was to hopefully help alleviate some of the emotions that occur during corrections.
This is great! Such a simple and comprehensive explanation, it's a great reminder to keep buying (and if possible even more) when the market is going down and not be discouraged by it.
Yes sir. Thank God for you, look like you read my mind... recently I started trading FVG with BOS but am having difficulties in choosing right FVG to trade off of from
Thank you for the comment. I’m glad you liked the video. I have since made an updated video on DCA that you might be interested in. I'll link it below. I wanted to add that being an active trader is very difficult. Although it can be very tempting to try and is quite popular, the long-term results are typically not good for most people. Here are some recent statistics: 72% of day traders end the year with financial losses, according to FINRA, and a mere 1% succeed over five years, typically facing financial losses for six months before quitting. Additionally, 70% of traders say they have a trading strategy relying on technical analysis. Thus, please be careful. Anyway, here's the updated video. ruclips.net/video/QVUqNbvaGWI/видео.html
I'm glad you found the information informative. I've since created an updated version of this topic that includes additional information. If you're interested, you can access it through the following link: ruclips.net/video/QVUqNbvaGWI/видео.html
Thank you for the comment! I appreciate it. Thanks for checking out the video. I do think understanding the benefits of dollar-cost averaging (DCA) can help lessen the stress during market corrections. Hopefully, the video addresses this concept.
Thank you for the comment! I'm glad to hear that you liked the video. I have an updated video that covers similar ideas and other tips, and I'll link it below. Regarding your question, I don't recommend those types of leveraged funds. Typically, large fund managers and others use funds like this for very short-term plays. However, the vast majority of professionals fail to beat the market consistently! I understand that in a positive year, funds like this can show remarkable gains, but, for example, in 2022 it dropped 79%. Keep in mind that if something goes down by about 80%, it must go up by 400% to break even. In fact, this fund is still down about 25% from where it was in November 2021 and the overall market is at all time highs. These types of investments are very risky. ruclips.net/video/QVUqNbvaGWI/видео.html
Wow, great presentation! I didn't think a market that would go up, down, and then back up could beat a market that's always going up. What a cool scenario you provided. Thanks for the video!
First thank you for the great video I have a few questions 1. If you have the lump sum at the start of the year is it best to just purchase it all at once? it seems planning to dollar cost average when you already have the money is a form of attempting to time the market. 2. Will you ever do a video about why and how to rebalance a portfolio? 3. If your portfolio is nearly entirely index funds is it still worth rebalancing assuming that would accrue transaction fees?
Assuming someone has a lump-sum to invest, lump-sum investing outperforms taking that amount and averaging it into the market about 70% of the time. Rebalancing is important as someone nears or is in retirement. When younger, a broad market ETF, such as the S&P 500, will outperform other investments, such as bonds, gold, etc. Rebalancing is more important as someone nears or is in retirement.
lump sum investing in scenario 1 = $7,200 value at end of 10 months - or $4,800 gain vs. initial investment. in scenario 3, lump sum buying up front yields 0 gain. Dollar-cost averaging is / feels like less of a gamble (also, lower risk, lower rewards, but lower losses too)
As Jack Bogle says: " The less you rebalance, the more money you are going to have, because you are always selling the better performing assets!" And no, DCA method is not timing the market, because you will be investing REGULARLY, not waiting for dips
Rebalancing is pretty dumb unless in a tax sheltered account. You have to pay capital gains every time you sell (assuming it was for a profit), paying capital gains every single year long term will SIGNIFICANTLY reduce your returns. Your strategy as an investor should be one that does not require rebalancing to begin with, or if so it should be minimal. If you dollar cost average into an S&P 500 index fund there’s never any rebalancing that needs to be done
I do it a lot strategically because markets will always surprise you. I take half of a position and if the market goes against me. I'm happy. I'll load up on the next price move. If it goes in my direction I'll scale up. Good vid
I appreciate you illustrating how trends that are more likely actually outperform or are equal to the hopeful but not probable scenario. Thanks for doing these videos. :)
I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my portfolio for retirement. I'm seeking to invest $200K across markets but don't know where to start.
I certainly don't possess enough knowledge about all of your personal circumstances that may need to be considered. I can't provide specific advice, but I do have a few videos that I believe would be beneficial for you to watch. They would help give you more of a solid foundation before seeking advice. Here they are: ruclips.net/video/EMHi0yhc3ZA/видео.html ruclips.net/video/V0m8r2Ft7kY/видео.html ruclips.net/video/FqKCDqcOqWg/видео.html
Great vid, understood it very fast even for a beginner like me. Should I do this stragegy on one stock or should I spread my investment across multiple stocks?
Glad you liked it. For a more detailed review of DCA, you might want to also check out this video: ruclips.net/video/QVUqNbvaGWI/видео.html For most individual investors and, especially for beginners, I would recommend staying away from trying to pick individual stocks and instead focus on a low cost ETF for something like the S&P 500. For more information about doing this, check out my video about investing in the S&P 500: ruclips.net/video/LL-lkcM1_4U/видео.html
Hi Mike. Getting into investing for the first time and this helped make things a lot clearer. Question - for a stock we feel very confident with long-term (e.g. a top big tech stock) when they experience a dip, what would be the pros/cons of buying more stock than your usual DCA rate during these periods? Or does this defeat the purpose of DCA as we are changing the amount we invest, and is it now classed as a different strategy entirely/a hybrid strategy? I was thinking that, even though we won't know for sure when we have reached the bottom, even if the stock does drop further, wouldn't that justify buying even more of it? If we are confident it will long-term bounce back and keep growing. Thanks appreciate any input.
We would want to remember that it is difficult to try and pick individual stocks and beat the overall market on a consistent long-term basis. In recent years, the big tech stocks have outperformed, but in a weak market, they may very well suffer bigger losses too. I should also mention that professionals can't beat the market either. In fact, over 10, 15, and 20-year periods, over 90% of professionally managed mutual funds do worse than their S&P 500 benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. Just use a low-cost ETF for the S&P 500 or the total market fund. Your question deals with an individual stock, so I wanted to point those facts out. An individual stock can go down for many reasons and may not always bounce back. In 1973, the top five companies in the S&P 500 were IBM, AT&T, Exxon, Kodak, and General Motors. By the year 2000, the top five companies had shifted to General Electric, Intel, Cisco Systems, Microsoft, and Pfizer. As of 2023, the top five are Apple, Microsoft, Amazon, NVIDIA, and Alphabet. It's fascinating to wonder what the top five will look like in another 10 or 20 years. Now, as for your question, DCA can be very beneficial to an investor who is consistent with saving and investing every month, as these video demonstrates. When there are major corrections or maybe even a weak market for a couple of years, there is certainly nothing wrong with scraping together some extra dollars to try and invest during those periods. It's actually a very good idea to do so. Just remember that no one can 'time' the market or know how long these periods will last. For almost all investors, just like with professionals, they would do better just buying the S&P 500 or total market fund. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023: In the past five years, it has averaged 15.75%. The past ten years, it averaged 12.07%. The past 20 years, it averaged 9.69%. The past 30 years, it averaged 10.16%. And the past 40 years, it averaged 11.37%. But those are only the returns if someone stayed completely invested throughout those periods of time. Anyway, I am going to link a couple of other videos here that I believe may be very beneficial for you to check out, especially since you mentioned you are just getting started. After watching these, please let me know if you have further questions. The S&P 500 Explained in Detail: ruclips.net/video/LL-lkcM1_4U/видео.html How To Be A Better Investor: ruclips.net/video/FqKCDqcOqWg/видео.html Investing 101 Comprehensive Guide: ruclips.net/video/_ohXfpxM1lE/видео.html I hope some of this information is helpful to you.
I buy once for every week. But I use value averaging, not DCA. Basically you invest even more when the market is down and invest even less when the market is rising.
Superb video, everyone understands buying things on sale at the clothing and grocery store, great way to put it in perspective and make bear markets an opportunity.
Thank you for the help, but you did not show the worst case, if the market goes up in the middle and then it returns back to nearly the same value. In such a case there is a problem ....
Yes, there are certainly other scenarios. However, many of the most common mistakes investors make occur during market corrections or extended downturns. This video was to hopefully help alleviate some of the emotions that occur during corrections and, thus, avoid common mistakes.
Excellent explanation of DCA for a beginner like me. Easy to remember for me now. Also makes sense not to be emotional when share prices go down. Thank you.
Yes, I can add that to my list of topics. Thanks for the suggestion. The S&P 500, for example, offers only around a 1.5% dividend. It used to be much higher in the 80s and 90s, but it has been dropping, mostly due to the increased dominance of technology companies within it. Dividends are a nice benefit for someone in retirement because they can help provide additional income while an investor weathers a market downturn. It may be later this year, but I will get to that video. Until then, here's a video that's related to the topic. ruclips.net/video/EMHi0yhc3ZA/видео.html
Guys, what if i buy one share of voo stock every month, no matter how much the share price is going to be, will i have the same result as putting away certain amount each month like the illustrstion in the video.. ❤
Thanks for checking out the vidoe. I would suggest saving and investing as much as you can each month and buying the number of shares that allows. The important thing is to stay with it every month. It's not a good idea to feel you can 'time' the market, which means figuring out when is the best time to buy. Just be consistent. If you're interested, here's another video on Dollar Cost Averaging and one on the S&P500 that goes into lots of details and mentions the VOO. DCA: ruclips.net/video/QVUqNbvaGWI/видео.html Investing in S&P 500: ruclips.net/video/LL-lkcM1_4U/видео.html
Hi Mike. I’m a first time investor and I’ve picked individual stocks to start off but I was wondering since I don’t have a lump sum readily available would DCA be the right way to go or should I save up a lump and then invest? I believe if I do wait I will be missing opportunities and it would feel like timing the market. But if I DCA consistently, it will bring my cost-average up, limiting my returns. What do you suggest?
Most people never have a lump sum to invest all at once. That’s why DCA (dollar-cost averaging) is absolutely the way to go. Just save and invest what you can every month, and stick with it through all the ups and downs. Stay consistent and make it a habit. Congratulations on getting started with investing! Keep in mind that most people are better off using low-cost ETFs rather than trying to pick individual stocks. Especially if you’re just getting started, I’d like to suggest a few other videos for you to watch when you have time. I think they’ll be very helpful to you! As you watch them, feel free to ask questions anytime. I always appreciate hearing feedback and questions. The S&P 500 Explained in Detail: ruclips.net/video/LL-lkcM1_4U/видео.html A new DCA Video: ruclips.net/video/QVUqNbvaGWI/видео.html The Most Important Lessons in Investing: ruclips.net/video/WxEYYZSo4wI/видео.html The optimal order to invest: ruclips.net/video/tW5o5K7BDUs/видео.html How to become a millionaire on an average income! ruclips.net/video/jLePdbCMr0k/видео.html
Yes, when the market drops, it can really be a benefit to continue buying and, if possible, add a little extra to the monthly investment, when investing in something like a broad diversified fund like the S&P 500.
If you have the funds ...is this the longer version of just putting a large sum on in one go "now" and waiting 10yrs? Instead of putting small amounts on every month for 10yrs?
If someone does have a large sum that are thinking of investing then the question becomes lump-sum investing vs dollar-cost averaging. There is good evidence and studies about this from the likes of Vanguard and others. Roughly lump-sum wins out around 70% of the time. If you really want a detailed look at the studies and then an example of comparing various methods if someone would have started right before the housing crises in 2007, this video covers that information, if interested. ruclips.net/video/V0m8r2Ft7kY/видео.html
If you take the time to maybe watch this video, it might even convince you more to me an investor rather than trying to trade very much. :) ruclips.net/video/-wbxq54LkLw/видео.html
@@MikesFinancialEdge I remember enjoying the class. Had recently got into investing then and was buying my own stock picks. You had mentioned you used to do that and explained how you had switched to dollar cost averaging into ETF's for the financial impact and emotional side of investing. (not having to check your account constantly knowing in the long run you'd do just fine). Impacted my investing journey that day. Thank you.
I DCA daily, and temporarily 'bump up' those amounts during dips/downtimes. Get greedy when "blood is on the street, even if it's your own" Warren Buffett
In the top scenario, lump-sum investment upfront is ideal. There is a tradeoff: when you expect more price volatility, you should DCA, and when you expect little volatility, you should invest up-front and get time in the market. Of course, all this assumes the ROI will go up eventually. Otherwise you should neither DCA nor lump-sum-invest into it. I want to create a simulator which asks you about the expected yearly growth rate and volatility, generates random price walk scenarios from those expectations, and optimizes the schedule to invest.
Yes, there are times lump-sum investing is ideal, assuming someone has a lump-sum to invest. The method of dollar cost averaging is great for those who want to save and invest monthly or quarterly throughout their life. In addition, it helps people with their emotions when the market goes down. Trying to time the market is usually harmful to individual investors.
@@MikesFinancialEdge Hello. Great video and great channel. I watched your videos and I have a question for you sir. The question is the following: How better to do with our profit from shares. Let's say we have $1,000 in shares in 4 companies, from which we currently have $80 in total profit, $20 per company. Should we take that $80 in net profit and reinvest it in one of those 4 companies or another new company, or let it accumulate and put new fresh outside money into our portfolio. Which will ultimately be better as a strategy in 15-20 years. investing. To periodically take the accumulated profit and reinvest it or to bring only fresh external money into our portfolio. I am worried that if I take the net accumulated profit, it is possible to reduce the number of points (parts of shares) that I own in total and thus in a long period of time have a smaller profit. But I'm not that good at math, and that's why I'm asking for your advice. Even a video that explains exactly this question that I ask, if you explain it so clearly how to do it, it will be super useful for me and for your audience. Please reply if possible. I am very hesitant on what to do, should I take the profit and reinvest it in the same or new companies or just put new fresh money into my portfolio. I play long-term, at least 20 years time and averaging, dollar cost averaging strategy. With respect: Nicholas
For most all individual investors, they would be better off buying a low cost index fund for the S&P 500, such as the SLPG, rather than buying individual stocks. Most actively managed funds underperform the S&P 500 over 15 year periods. In fact, over a 15 year period, around 90% underperform, when you include the fees. If professionals struggle to beat the market, most individuals shouldn't think they can. Thus, you might want to avoid individual stocks and go for the S&P. Your question depends on many factors. Such as whether the stocks are held in a retirement account or an individual account. Either way, there wouldn't be profits on the shares, unless you sell. There would be gains on any dividends you might earn. However, as stated, rather than worry about your question, it would seem you could benefit by just investing in the S&P 500 and choose a low cost ETF to do it. When the cash is there to buy more shares, do so.
@@MikesFinancialEdge Hello. Thank you for your attention! I understand your recommendations very well and I agree with them. I am 40 years old. and my shares are like a second pension insurance, which means that I will invest long-term, at least 15-20 years. minimum. But my dilemma is a bit more how to say convoluted at least for me. Although you answered me, I think you misunderstood me. But I will give the example of my question again, using the s&p 500. Let's say my question like this: For example, I have invested about 40,000 dollars in the s&p500, which is roughly about 10 stock-positions. And let's say that at the moment I have a profit from them, for example, 5000 dollars, which I have not withdrawn-sold yet. For example, is it a good idea to take that $5000 and buy a new stock and some of the s&p500 (or another etf or another company's stock), or not take that $5000 because taking it would probably reduce my original 10 positions to 8.5 positions, on which I will eventually accrue a new profit, but I will have bought a NEW real stock and some again in the same S&p 500, although probably at a higher price than the previous initial 10. I'm having a bit of a hard time describing my question properly... Of course, every month I regularly bring in external fresh money, that's clear. But is it a good idea to take the net momentary profit sometimes and reinvest it in new positions in the same s&p500 or another company or not to take those momentary profits because that's how I count the number of original positions, although with the withdrawal I will add new fresh positions. My question is probably a bit confusing, I apologize for that. But I've been scratching my head for a few weeks about which is the better option. :)
That's fantastic! I'm glad to hear you found it so worthwhile, and I truly appreciate your support. Thank you for your comment. By the way, I’m not sure if it's better, but I do have a newer version of DCA on the channel. If you haven’t watched it yet and are interested, here’s the link: ruclips.net/video/QVUqNbvaGWI/видео.html Let me know which one you like the best.
Thanks for watching. Actually, all three scenarios started at $20. In the first graph, after 10 periods, it reached $60, representing a 200% increase. The second graph ended at $30, indicating a 50% increase, while the third graph finished right where it started or flat. Dollar Cost Averaging: ruclips.net/video/QVUqNbvaGWI/видео.html Lump Sum vs Dollar Cost Averaging: ruclips.net/video/V0m8r2Ft7kY/видео.html
Well, most people don't have a big lump sum to invest all at once and DCA is a wonderful approach for someone that can start saving & investing every month and build that habit. However, for those that might have a lump sum to invest, there are a few things to keep in mind. Let's say you are trying to choose whether to invest a lump sum all at once or "average" it in over the course of a year. Looking at 10-year & 20-year investment models, research would tell us that lump-sum investing slightly wins out about 65-70% of the time. However, it may add a bit of anxiety to put everything in at once, so, to ease someone's mind, averaging it in over the year can be acceptable and maybe better for some people to lessen their worries. This is the short answer and there are other things to consider. I feel I need to do a more detailed video about this sometime.
@MoneyWise I agree . I used to only do dca from my paycheck on a weekly basis . Now I do lump sum . The only reason I asked about your chart is to see how lump sum would do vs dca on your own example.
If we were looking at those three examples in the video and over that small sample period, lump-sum investing would be best only on the first example and DCA would have been better on the last two examples.
When your statement on your individual brokerage account says "taxable income" $49.21 does this mean this is the amount youll have to pay taxes on? Do you only pay taxes on gains when you sell and when you sell is taxes automatically deducted like the lottery?
You will only owe taxes on shares you sell, and those would typically be capital gains taxes(as long as you have held the shares for at least one year), which are lower than income taxes. If you received dividends, you would also owe taxes on those. However, if you don’t sell shares, you won’t owe taxes until you sell. Gains on shares you haven’t sold yet are called unrealized gains.
@MikesFinancialEdge thanks Mike. When i do sell are the taxes deducted upon me selling meaning it's taken out or is it something that's filed separately
Taxes won’t be withheld. Instead, you’ll receive a 1099 form from your brokerage account after the calendar year, which you’ll use when filing your tax return. Whether or not you’ll need to pay capital gains taxes depends on your situation. I think this video would be worth your time to help you better understand all of this. ruclips.net/video/0-5l__S2lMk/видео.html
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Hey Everyone - Thanks for watching. After this video, you might want to check out my video comparing Dollar Cost Averaging vs. Lump-Sum Investing. Here it is: ruclips.net/video/V0m8r2Ft7kY/видео.html
Also, if you liked this video, please considering subscribing to the channel for more content and leave your comments below.
Everyone should “rewatch” this monthly!
Thank you so much.
This blew my mind! Market dips are just opportunities to grab more shares at a discount. And if you stick to a low-cost index ETF, you have virtually zero chance of losing your shirt because the market is always going up in the long run
Thanks for sharing.
Yea but not everyone has "long run"
@@muffemodas long as you're under 67
If you're buying anything but Bitcoin right now, you're a complete fool.
@@muffemodIt depends. Perhaps investing long term is for your kids or nieces and nephews.
I rewatch this and frequently resend to my son. Best DCA vid on YT.
Thank you for the comment. I am happy to hear you find it valuable enough to rewatch and share with you son.
Never really understood dollar cost averaging until I found this vid thanks man
Thanks for the comment and checking out the channel.
Very helpful.Tq.
Great video. In a twisted sense it’s not the end of the world if you’re in the red during your accumulation phase. Then hope the market shoots upwards the end of your accumulation.
Absolutely! During the accumulation phase it really doesn't matter what order the gains and losses happen. But, we can feel good about wha the market does over longer periods. In fact, look at these rates of return with the dividends it pays for the periods ending in 2023.
In the past five years it has averaged 15.75%.
The past ten years it averaged 12.07%
The past 20 years, it averaged 9.69%
The past 30 years, it averaged 10.16%
And the past 40 years it averaged 11.37%
And it's up around 14% this year already.
But those are only the returns if someone stayed completely invested throughout those periods of time. Thanks for checking out the video and the comment!
i didn't understand this at first, but then now i really understand it and im so happy for this precious knowledge, thanks for sharing!
Great! I'm happy to hear that it helped you better understand this concept. It's so important to manage our emotions and avoid making mistakes when the market goes through a correction or extended downturn. Thank you so much for the comment and for checking out the video. If you're interested, there's another video that might be helpful in avoiding other mistakes: The 20 Most Important Investment Rules & Lessons Every Investor Needs to Know. ruclips.net/video/WxEYYZSo4wI/видео.html
I'm really glad I watched this. I've been waiting for the market correction, and had no idea significant dips only happen once a yr or once every three years. Plus, I really like that the three scenarios are visually graphed out to show that continuing to invest even when the market goes down yields more shares owned. Thanks!
Thanks for the comment and checking out the channel.
This was brilliantly put together. I’ve been following your videos for months now and with professional help, I’m making outstanding progress with my money decisions.
Thank you so much. I am glad you have found them helpful and I am now making more on a regular basis.
Hello Akina - What were you investing in that caused that? Investing should always be thought of as a longer term venture. I'll be making some other videos soon about how to invest, but you might want to check these two out.
ruclips.net/video/FqKCDqcOqWg/видео.html
ruclips.net/video/-wbxq54LkLw/видео.html
Hello Honath - Everyone can feel a bit green in the beginning, but it's important to get started and stick to it. It does worry me to hear someone say they do some speculation when it comes to investing. I'll be doing some more videos soon about how to invest, but you might start with these two. One will help us avoid some common mistakes and the other talks about investing and becomeing financially independent.
ruclips.net/video/FqKCDqcOqWg/видео.html
ruclips.net/video/-wbxq54LkLw/видео.html
Such a great video and easily understandable thanks 🙏
Thank you for checking out the video. I do appreciate your comment and I'm happy to hear you thought it was helpful.
I need to watch this video often as a reminder. It can sure help with emotions! Great stuff!
It is a good message for everyone! Thanks for the comment.
Wow, I've been shying away from investing. This reminds me of the long term vision.
Always a good thing to think about the future. Thanks for watching.
Nice way to illustrate DCA. I will share this. (Maybe write up in the top right hand corner the amount invested was $2400 over the period so the returns gain overall could be visualized easier)
Thanks for watching. I'm in the process of creating a new video on this topic. I'll try and remember to add your suggestion. Hope to have it up within a week. Hopefully, it will be a good one to share with people, too.
Great video. Mike's your content is authentic. Thanks for sharing.
Thank you for the comment! I am happy to hear you liked the video. Hopefully, you'll enjoy some of the other videos as well.
Simple and concise, everyone needs to see this to help them overcome their fears in a down market. I got a late start saving for retirement, but I've always understood the advantage of DCA. I started saving for retirement in 2012 and, even now with the market down over 20%, I haven't changed a thing. Market slumps like this are a golden opportunity for the long term saver. This is when real wealth is created. I plan to retire in 10 years with more than enough savings to have a carefree retirement.
Thanks for the comment.
Has your opinion on this changed in the last 2 years since you wrote this? Thank you
Not at all-most people aren’t working with a lump sum to invest; instead, building a habit of saving and investing monthly is key to long-term financial success. When you do this, it’s best not to worry about the market’s ups and downs over any month or even a year or two. Take a long-term view and focus on investing regularly. Studies consistently show that people who try to time the market often underperform it in significant ways. I recently made a new version of this video if you're interested, along with one comparing lump-sum investing to dollar-cost averaging (DCA), showing that lump-sum tends to win out. You might also find some of my other videos helpful on how to avoid common investing mistakes-I'll link a few here for you to check out! Thanks for checking this video out and the comment.
Lump-sum vs DCA: ruclips.net/video/V0m8r2Ft7kY/видео.html
Another DCA: ruclips.net/video/QVUqNbvaGWI/видео.html
Most Important Lessons in Investing: ruclips.net/video/WxEYYZSo4wI/видео.html
How To Invest BETTER And Avoid STUPID Mistakes: ruclips.net/video/FqKCDqcOqWg/видео.html
@@pharaohsmagician8329 Not in the slightest. If you have a long time horizon before you'll need your portfolio, there is no need to fear a down market...just keep investing.
@dlg5485 Great advice!😉
It’s even better if you can do some technical analysis and have four different buy points … then go in heavier with each resistance level
Yes, that discussion could be interesting for some. However, the reality is that most individual investors don't invest significant time in learning and applying technical analysis and probably shouldn't attempt doing that. Many of the most common mistakes they make occur during market corrections or extended downturns. For the vast majority of individual investors, attempting to time the market is not advisable. This video was to hopefully help alleviate some of the emotions that occur during corrections.
Now I completely understand this concept... many thanks!
Great! Thank for checking out the video and thank you for the comment! Happy to hear it was helpful!
This is great! Such a simple and comprehensive explanation, it's a great reminder to keep buying (and if possible even more) when the market is going down and not be discouraged by it.
Thanks for the comment!
Yes sir. Thank God for you, look like you read my mind... recently I started trading FVG with BOS but am having difficulties in choosing right FVG to trade off of from
Thank you for the comment. I’m glad you liked the video. I have since made an updated video on DCA that you might be interested in. I'll link it below.
I wanted to add that being an active trader is very difficult. Although it can be very tempting to try and is quite popular, the long-term results are typically not good for most people. Here are some recent statistics: 72% of day traders end the year with financial losses, according to FINRA, and a mere 1% succeed over five years, typically facing financial losses for six months before quitting. Additionally, 70% of traders say they have a trading strategy relying on technical analysis.
Thus, please be careful. Anyway, here's the updated video. ruclips.net/video/QVUqNbvaGWI/видео.html
This was an outstanding explanation of dollar cost averaging.
Thank you!
This videos truly deserves a million views
Thanks for the great comment! I've started making more videos now.
What an informative video. Thank you so much.
I'm glad you found the information informative. I've since created an updated version of this topic that includes additional information. If you're interested, you can access it through the following link: ruclips.net/video/QVUqNbvaGWI/видео.html
Beautiful video, and greatly explained! You're phenomenal.
Thank you for the comment! I appreciate you checking out the video and hope you like some of the othe content on the channel.
You are the best 👌 you are the only one how explained it in very professional way and more Mathematical Logic 🙏
Thanks for the nice comment and checking out the channel.
Best video I've seen yet.
So well explained 👏 👌
Thank you for the comment! I appreciate it. Thanks for checking out the video. I do think understanding the benefits of dollar-cost averaging (DCA) can help lessen the stress during market corrections. Hopefully, the video addresses this concept.
This video is really great! Easy to understand. How do you feel about levered investments like tqqq and dollar cost averaging
Thank you for the comment! I'm glad to hear that you liked the video. I have an updated video that covers similar ideas and other tips, and I'll link it below. Regarding your question, I don't recommend those types of leveraged funds. Typically, large fund managers and others use funds like this for very short-term plays. However, the vast majority of professionals fail to beat the market consistently! I understand that in a positive year, funds like this can show remarkable gains, but, for example, in 2022 it dropped 79%. Keep in mind that if something goes down by about 80%, it must go up by 400% to break even. In fact, this fund is still down about 25% from where it was in November 2021 and the overall market is at all time highs. These types of investments are very risky. ruclips.net/video/QVUqNbvaGWI/видео.html
Wow, great presentation! I didn't think a market that would go up, down, and then back up could beat a market that's always going up. What a cool scenario you provided. Thanks for the video!
Thank you for watching!
First thank you for the great video I have a few questions
1. If you have the lump sum at the start of the year is it best to just purchase it all at once? it seems planning to dollar cost average when you already have the money is a form of attempting to time the market.
2. Will you ever do a video about why and how to rebalance a portfolio?
3. If your portfolio is nearly entirely index funds is it still worth rebalancing assuming that would accrue transaction fees?
Assuming someone has a lump-sum to invest, lump-sum investing outperforms taking that amount and averaging it into the market about 70% of the time. Rebalancing is important as someone nears or is in retirement. When younger, a broad market ETF, such as the S&P 500, will outperform other investments, such as bonds, gold, etc. Rebalancing is more important as someone nears or is in retirement.
lump sum investing in scenario 1 = $7,200 value at end of 10 months - or $4,800 gain vs. initial investment. in scenario 3, lump sum buying up front yields 0 gain. Dollar-cost averaging is / feels like less of a gamble (also, lower risk, lower rewards, but lower losses too)
As Jack Bogle says: " The less you rebalance, the more money you are going to have, because you are always selling the better performing assets!"
And no, DCA method is not timing the market, because you will be investing REGULARLY, not waiting for dips
Rebalancing is pretty dumb unless in a tax sheltered account. You have to pay capital gains every time you sell (assuming it was for a profit), paying capital gains every single year long term will SIGNIFICANTLY reduce your returns.
Your strategy as an investor should be one that does not require rebalancing to begin with, or if so it should be minimal. If you dollar cost average into an S&P 500 index fund there’s never any rebalancing that needs to be done
Will be posting a new video in about a week comparing DCA and lump-sum investing.
excellent explanation covering different situations.
Thank you for the comment! Happy to hear you liked the video.
I do it a lot strategically because markets will always surprise you. I take half of a position and if the market goes against me. I'm happy. I'll load up on the next price move. If it goes in my direction I'll scale up. Good vid
Thank you!
If the price goes against you just after you scale up how do you react ?
Solid video and presentation, to add on - keep a large chunk in a 5% or greater MM fund to draw from each wk/month.
And, at today's rates, MM funds are a good place to park savings we may need access to for an emergency fund. Thanks for checking out the video.
I appreciate you illustrating how trends that are more likely actually outperform or are equal to the hopeful but not probable scenario. Thanks for doing these videos. :)
Appreciate the nice comment!
I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my portfolio for retirement. I'm seeking to invest $200K across markets but don't know where to start.
I certainly don't possess enough knowledge about all of your personal circumstances that may need to be considered. I can't provide specific advice, but I do have a few videos that I believe would be beneficial for you to watch. They would help give you more of a solid foundation before seeking advice. Here they are:
ruclips.net/video/EMHi0yhc3ZA/видео.html
ruclips.net/video/V0m8r2Ft7kY/видео.html
ruclips.net/video/FqKCDqcOqWg/видео.html
Great vid, understood it very fast even for a beginner like me. Should I do this stragegy on one stock or should I spread my investment across multiple stocks?
Glad you liked it. For a more detailed review of DCA, you might want to also check out this video: ruclips.net/video/QVUqNbvaGWI/видео.html
For most individual investors and, especially for beginners, I would recommend staying away from trying to pick individual stocks and instead focus on a low cost ETF for something like the S&P 500. For more information about doing this, check out my video about investing in the S&P 500: ruclips.net/video/LL-lkcM1_4U/видео.html
Hi Mike. Getting into investing for the first time and this helped make things a lot clearer. Question - for a stock we feel very confident with long-term (e.g. a top big tech stock) when they experience a dip, what would be the pros/cons of buying more stock than your usual DCA rate during these periods? Or does this defeat the purpose of DCA as we are changing the amount we invest, and is it now classed as a different strategy entirely/a hybrid strategy? I was thinking that, even though we won't know for sure when we have reached the bottom, even if the stock does drop further, wouldn't that justify buying even more of it? If we are confident it will long-term bounce back and keep growing. Thanks appreciate any input.
We would want to remember that it is difficult to try and pick individual stocks and beat the overall market on a consistent long-term basis. In recent years, the big tech stocks have outperformed, but in a weak market, they may very well suffer bigger losses too. I should also mention that professionals can't beat the market either. In fact, over 10, 15, and 20-year periods, over 90% of professionally managed mutual funds do worse than their S&P 500 benchmarks. It’s not hard to do better than professionals, and you don’t have to know anything about picking stocks. So don’t pay them a bunch of fees to do worse. Just use a low-cost ETF for the S&P 500 or the total market fund.
Your question deals with an individual stock, so I wanted to point those facts out. An individual stock can go down for many reasons and may not always bounce back. In 1973, the top five companies in the S&P 500 were IBM, AT&T, Exxon, Kodak, and General Motors. By the year 2000, the top five companies had shifted to General Electric, Intel, Cisco Systems, Microsoft, and Pfizer. As of 2023, the top five are Apple, Microsoft, Amazon, NVIDIA, and Alphabet. It's fascinating to wonder what the top five will look like in another 10 or 20 years.
Now, as for your question, DCA can be very beneficial to an investor who is consistent with saving and investing every month, as these video demonstrates. When there are major corrections or maybe even a weak market for a couple of years, there is certainly nothing wrong with scraping together some extra dollars to try and invest during those periods. It's actually a very good idea to do so. Just remember that no one can 'time' the market or know how long these periods will last. For almost all investors, just like with professionals, they would do better just buying the S&P 500 or total market fund.
In fact, look at these rates of return with the dividends it pays for the periods ending in 2023:
In the past five years, it has averaged 15.75%.
The past ten years, it averaged 12.07%.
The past 20 years, it averaged 9.69%.
The past 30 years, it averaged 10.16%.
And the past 40 years, it averaged 11.37%.
But those are only the returns if someone stayed completely invested throughout those periods of time. Anyway, I am going to link a couple of other videos here that I believe may be very beneficial for you to check out, especially since you mentioned you are just getting started. After watching these, please let me know if you have further questions.
The S&P 500 Explained in Detail: ruclips.net/video/LL-lkcM1_4U/видео.html
How To Be A Better Investor: ruclips.net/video/FqKCDqcOqWg/видео.html
Investing 101 Comprehensive Guide: ruclips.net/video/_ohXfpxM1lE/видео.html
I hope some of this information is helpful to you.
Brilliant explanation! 👏
I appreciate the comment. Thanks for checking out the video.
Wow! Incredible explanation. You have helped me a lot by explaining this so well. Thanks so much!!!
Thank you!
I buy once for every week.
But I use value averaging, not DCA.
Basically you invest even more when the market is down and
invest even less when the market is rising.
Thanks for the comment. Sorry I missed this earlier.🙂
Superb video, everyone understands buying things on sale at the clothing and grocery store, great way to put it in perspective and make bear markets an opportunity.
Thank you!
Well explained :)
Thank you for checking out the video and I appreciate the comment!
I loved it and subscribed. Thanks !
Thank you for subscribing. I've started making new videos now.
Very good explanation and presentation. Anybody could understand easily...
Thank you!
Excellent
Thank you for watching.
Thank you for the help, but you did not show the worst case, if the market goes up in the middle and then it returns back to nearly the same value. In such a case there is a problem ....
Yes, there are certainly other scenarios. However, many of the most common mistakes investors make occur during market corrections or extended downturns. This video was to hopefully help alleviate some of the emotions that occur during corrections and, thus, avoid common mistakes.
I find this perspective very useful. Thank you for the explanation.
Thank you
Thank you for this great video motivating me to keep going no matter what. Now there is a new COVID outbreak but I will keep this going.
thank you so much. easy, clear explanation.
Thanks for checking out the channel.
Excellent simple description, thanks
Thank you
Very instructive. I wish more people understood this.
Thanks for checking out the channel.
Excellent explanation. Thank you.
Glad you liked it!
I literally corrected a stock by buying at its lows. It was dipping, so I dumped money into it and it readjusted in real time.
Thanks for the comment. Sorry I missed this earlier.
Got yourself a new subscriber.
Things I already knew but great video nonetheless.
Looking forward to watch more of your videos and learn a lot more.
👍
Thank you. Making more videos now.
Excellent explanation of DCA for a beginner like me. Easy to remember for me now. Also makes sense not to be emotional when share prices go down. Thank you.
Thank you. Happy to hear it was helpful.
great video!! liking and subscribing to your channel, cannot wait for more content!
Thank you for subscribing. I'm now making more videos for the channel.
I saved this video to my favorites.
Happy to hear you value it. Thank you for the comment!
Best explanation ever thank you
Thank you
Hi, Mike . Can you do a video about dividend stocks for people close to retire ? Please.
Yes, I can add that to my list of topics. Thanks for the suggestion. The S&P 500, for example, offers only around a 1.5% dividend. It used to be much higher in the 80s and 90s, but it has been dropping, mostly due to the increased dominance of technology companies within it. Dividends are a nice benefit for someone in retirement because they can help provide additional income while an investor weathers a market downturn. It may be later this year, but I will get to that video. Until then, here's a video that's related to the topic. ruclips.net/video/EMHi0yhc3ZA/видео.html
Thanks for your hard work on this video. Helped me a lot!
Thank you and thanks for checking out the channel.
this video is worth a subscription
Thank you! Making more videos now.
Excellent explanation
Thanks - Glad you liked it.
Very good knowledge right here. I will share it to others.
Thank you so much.
Thank you for this explanation, please keep going
Thank you. I've started making videos again.
Thank you it was very informative and you explained it well.
Thanks for checking out the channel.
Liked and subscribed. Great content and good explanation. Keep up the good work!
Thank you for subscribing. I've started making more videos now.
Excellent explanation!
Thank you
Ty sir! This deserves 1 million views
Thanks for the great comment!
Guys, what if i buy one share of voo stock every month, no matter how much the share price is going to be, will i have the same result as putting away certain amount each month like the illustrstion in the video.. ❤
Thanks for checking out the vidoe. I would suggest saving and investing as much as you can each month and buying the number of shares that allows. The important thing is to stay with it every month. It's not a good idea to feel you can 'time' the market, which means figuring out when is the best time to buy. Just be consistent. If you're interested, here's another video on Dollar Cost Averaging and one on the S&P500 that goes into lots of details and mentions the VOO.
DCA: ruclips.net/video/QVUqNbvaGWI/видео.html
Investing in S&P 500: ruclips.net/video/LL-lkcM1_4U/видео.html
Hi Mike. I’m a first time investor and I’ve picked individual stocks to start off but I was wondering since I don’t have a lump sum readily available would DCA be the right way to go or should I save up a lump and then invest? I believe if I do wait I will be missing opportunities and it would feel like timing the market. But if I DCA consistently, it will bring my cost-average up, limiting my returns. What do you suggest?
Most people never have a lump sum to invest all at once. That’s why DCA (dollar-cost averaging) is absolutely the way to go. Just save and invest what you can every month, and stick with it through all the ups and downs. Stay consistent and make it a habit. Congratulations on getting started with investing! Keep in mind that most people are better off using low-cost ETFs rather than trying to pick individual stocks. Especially if you’re just getting started, I’d like to suggest a few other videos for you to watch when you have time. I think they’ll be very helpful to you! As you watch them, feel free to ask questions anytime. I always appreciate hearing feedback and questions.
The S&P 500 Explained in Detail: ruclips.net/video/LL-lkcM1_4U/видео.html
A new DCA Video: ruclips.net/video/QVUqNbvaGWI/видео.html
The Most Important Lessons in Investing: ruclips.net/video/WxEYYZSo4wI/видео.html
The optimal order to invest: ruclips.net/video/tW5o5K7BDUs/видео.html
How to become a millionaire on an average income! ruclips.net/video/jLePdbCMr0k/видео.html
brilliant video
Thank you!
During low period,buy more shares.
Thanks for the comment. Sorry I missed this earlier.🙂
You could actually scale up your DCA as the price goes down, if you are confident in the asset you are investing in.
Yes, when the market drops, it can really be a benefit to continue buying and, if possible, add a little extra to the monthly investment, when investing in something like a broad diversified fund like the S&P 500.
Watching again.❤
Happy to hear you think it's worth a re-watch!
If you have the funds ...is this the longer version of just putting a large sum on in one go "now" and waiting 10yrs? Instead of putting small amounts on every month for 10yrs?
If someone does have a large sum that are thinking of investing then the question becomes lump-sum investing vs dollar-cost averaging. There is good evidence and studies about this from the likes of Vanguard and others. Roughly lump-sum wins out around 70% of the time. If you really want a detailed look at the studies and then an example of comparing various methods if someone would have started right before the housing crises in 2007, this video covers that information, if interested. ruclips.net/video/V0m8r2Ft7kY/видео.html
@@MikesFinancialEdge Thank you.
I appreciate you checking out the video. Hope the information is helpful to you!
Thanks a lot Guruji$
Thank you for watching!
I feel like this video changed my life
Thank you for the nice comment and checking out the channel.
Great video! Thanks!
Thanks
Good explanation. Thank you.
Thank you!
Thank you for sharing your knowledge.
Thank you for checking out the channel.
dca good for bear market and bullish..i think i have to change my mindset from being a trader to investor with dca
If you take the time to maybe watch this video, it might even convince you more to me an investor rather than trying to trade very much. :)
ruclips.net/video/-wbxq54LkLw/видео.html
It’s just a wow 🤩 thanks
Thanks!
I buy every day a fix $ amount. Also my TSP, options and crypto. I just have to stick with the plan and let’s make money
Thanks for the comment. Sorry I missed this earlier.🙂
My memory is a little foggy from ten years ago but you seem like a professor I had in college. Could this be true? CSC?
Hello - Yes, it appears you took a Math class with me during the Fall of 2013.
@@MikesFinancialEdge I remember enjoying the class. Had recently got into investing then and was buying my own stock picks. You had mentioned you used to do that and explained how you had switched to dollar cost averaging into ETF's for the financial impact and emotional side of investing. (not having to check your account constantly knowing in the long run you'd do just fine). Impacted my investing journey that day. Thank you.
I DCA daily, and temporarily 'bump up' those amounts during dips/downtimes. Get greedy when "blood is on the street, even if it's your own" Warren Buffett
Yep:)
Well explained finally! thank you sir.
Thanks for checking out the channel.
Thanks
Thanks for watching
Wonderful video. One for the ages
Thank you!
Excellent....
Thanks
Thank you! this was very helpful
Thanks for checking out the channel.
This is a fantastic video
Thank you!
That’s how you DCA ❤
Thank you 🙏🏼
Thanks for watching.
In the top scenario, lump-sum investment upfront is ideal. There is a tradeoff: when you expect more price volatility, you should DCA, and when you expect little volatility, you should invest up-front and get time in the market.
Of course, all this assumes the ROI will go up eventually. Otherwise you should neither DCA nor lump-sum-invest into it.
I want to create a simulator which asks you about the expected yearly growth rate and volatility, generates random price walk scenarios from those expectations, and optimizes the schedule to invest.
Yes, there are times lump-sum investing is ideal, assuming someone has a lump-sum to invest. The method of dollar cost averaging is great for those who want to save and invest monthly or quarterly throughout their life. In addition, it helps people with their emotions when the market goes down. Trying to time the market is usually harmful to individual investors.
@@MikesFinancialEdge Absolutely agree. Thanks for the reply, and for the great content!
@@MikesFinancialEdge
Hello. Great video and great channel.
I watched your videos and I have a question for you sir.
The question is the following:
How better to do with our profit from shares.
Let's say we have $1,000 in shares in 4 companies, from which we currently have $80 in total profit, $20 per company. Should we take that $80 in net profit and reinvest it in one of those 4 companies or another new company, or let it accumulate and put new fresh outside money into our portfolio.
Which will ultimately be better as a strategy in 15-20 years. investing. To periodically take the accumulated profit and reinvest it or to bring only fresh external money into our portfolio.
I am worried that if I take the net accumulated profit, it is possible to reduce the number of points (parts of shares) that I own in total and thus in a long period of time have a smaller profit.
But I'm not that good at math, and that's why I'm asking for your advice.
Even a video that explains exactly this question that I ask, if you explain it so clearly how to do it, it will be super useful for me and for your audience.
Please reply if possible. I am very hesitant on what to do, should I take the profit and reinvest it in the same or new companies or just put new fresh money into my portfolio. I play long-term, at least 20 years time and averaging, dollar cost averaging strategy.
With respect:
Nicholas
For most all individual investors, they would be better off buying a low cost index fund for the S&P 500, such as the SLPG, rather than buying individual stocks. Most actively managed funds underperform the S&P 500 over 15 year periods. In fact, over a 15 year period, around 90% underperform, when you include the fees. If professionals struggle to beat the market, most individuals shouldn't think they can. Thus, you might want to avoid individual stocks and go for the S&P.
Your question depends on many factors. Such as whether the stocks are held in a retirement account or an individual account. Either way, there wouldn't be profits on the shares, unless you sell. There would be gains on any dividends you might earn. However, as stated, rather than worry about your question, it would seem you could benefit by just investing in the S&P 500 and choose a low cost ETF to do it. When the cash is there to buy more shares, do so.
@@MikesFinancialEdge Hello. Thank you for your attention!
I understand your recommendations very well and I agree with them. I am 40 years old. and my shares are like a second pension insurance, which means that I will invest long-term, at least 15-20 years. minimum.
But my dilemma is a bit more how to say convoluted at least for me. Although you answered me, I think you misunderstood me.
But I will give the example of my question again, using the s&p 500. Let's say my question like this:
For example, I have invested about 40,000 dollars in the s&p500, which is roughly about 10 stock-positions. And let's say that at the moment I have a profit from them, for example, 5000 dollars, which I have not withdrawn-sold yet.
For example, is it a good idea to take that $5000 and buy a new stock and some of the s&p500 (or another etf or another company's stock), or not take that $5000 because taking it would probably reduce my original 10 positions to 8.5 positions, on which I will eventually accrue a new profit, but I will have bought a NEW real stock and some again in the same S&p 500, although probably at a higher price than the previous initial 10.
I'm having a bit of a hard time describing my question properly...
Of course, every month I regularly bring in external fresh money, that's clear. But is it a good idea to take the net momentary profit sometimes and reinvest it in new positions in the same s&p500 or another company or not to take those momentary profits because that's how I count the number of original positions, although with the withdrawal I will add new fresh positions.
My question is probably a bit confusing, I apologize for that. But I've been scratching my head for a few weeks about which is the better option.
:)
Great explanation of DCA!
Thanks for checking out the channel.
I watch this twice a week as I buy shares twice a week
That's fantastic! I'm glad to hear you found it so worthwhile, and I truly appreciate your support. Thank you for your comment. By the way, I’m not sure if it's better, but I do have a newer version of DCA on the channel. If you haven’t watched it yet and are interested, here’s the link: ruclips.net/video/QVUqNbvaGWI/видео.html Let me know which one you like the best.
Really clear and concise explanation and delivery thank you for this 🙏🏻
Thanks for checking out the channel.
also the fact that the second graph going from 10 to 20 means it’s a 100% increase. right?
Thanks for watching. Actually, all three scenarios started at $20. In the first graph, after 10 periods, it reached $60, representing a 200% increase. The second graph ended at $30, indicating a 50% increase, while the third graph finished right where it started or flat.
Dollar Cost Averaging: ruclips.net/video/QVUqNbvaGWI/видео.html
Lump Sum vs Dollar Cost Averaging: ruclips.net/video/V0m8r2Ft7kY/видео.html
What if I invested lump sum in the beginning. Could you tell me how that would turn out?
Well, most people don't have a big lump sum to invest all at once and DCA is a wonderful approach for someone that can start saving & investing every month and build that habit. However, for those that might have a lump sum to invest, there are a few things to keep in mind. Let's say you are trying to choose whether to invest a lump sum all at once or "average" it in over the course of a year. Looking at 10-year & 20-year investment models, research would tell us that lump-sum investing slightly wins out about 65-70% of the time. However, it may add a bit of anxiety to put everything in at once, so, to ease someone's mind, averaging it in over the year can be acceptable and maybe better for some people to lessen their worries. This is the short answer and there are other things to consider. I feel I need to do a more detailed video about this sometime.
@MoneyWise I agree . I used to only do dca from my paycheck on a weekly basis . Now I do lump sum . The only reason I asked about your chart is to see how lump sum would do vs dca on your own example.
If we were looking at those three examples in the video and over that small sample period, lump-sum investing would be best only on the first example and DCA would have been better on the last two examples.
@@MikesFinancialEdge thabk you so much for the answer
Good work 👏
Thank you.
When your statement on your individual brokerage account says "taxable income" $49.21 does this mean this is the amount youll have to pay taxes on? Do you only pay taxes on gains when you sell and when you sell is taxes automatically deducted like the lottery?
You will only owe taxes on shares you sell, and those would typically be capital gains taxes(as long as you have held the shares for at least one year), which are lower than income taxes. If you received dividends, you would also owe taxes on those. However, if you don’t sell shares, you won’t owe taxes until you sell. Gains on shares you haven’t sold yet are called unrealized gains.
@MikesFinancialEdge thanks Mike. When i do sell are the taxes deducted upon me selling meaning it's taken out or is it something that's filed separately
Taxes won’t be withheld. Instead, you’ll receive a 1099 form from your brokerage account after the calendar year, which you’ll use when filing your tax return. Whether or not you’ll need to pay capital gains taxes depends on your situation. I think this video would be worth your time to help you better understand all of this. ruclips.net/video/0-5l__S2lMk/видео.html
DCA is very good during a bear & volatile market.
I agree
Great Video!
Thank you