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Politics : Ask Michael Burke

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To: BGR who wrote (96831)	7/22/2002 3:36:48 AM
From: Simba	of 132070

BGR, OK, I will customize the analysis to your situation. date sp500 1-Jun-1993 453.83 21-July-2002 847.75 That gives a total return of 86.8% not including dividends. $1 invested on June 1, 1993 will be $1.87 not including paltry dividends. DCA will result in total return much less as all the principal is not working for the full period. In fact if the SP500 went in a straight line from 453 to 847 over this period and you were doing DCA on this line your investment would be up approximately by 0.5 * 86% = 43%. Unfortunately the SP500 did not climb linearly to 847 so your total returns will be smaller. As per my chart in home.att.net you should be up by < 20 % on your invested capital including a constant dividend of 2%. It is not that difficult to derive the chart in excel. But basic computations like the above should provide upper bounds on your return. Clearly it cannot be 13% compound annual as you claim. You say that you moved some of your SP500 money into NASDAQ the past 2 to 3 years. That should have reduced the total return much further given the shellacking NASDAQ index has taken. The cross currents chart echoes the same conclusions as my dca chart. Basically if you DCA'd into a 6% constant yield instrument you would have beaten the SP500 the past decade. That is the beauty of the dca chart that I made. You can read the return based on when you started the passive DCA plan. If indeed your account is up 180% (13% compound annual), either we are not comparing apples to apples. Maybe congratulations in order as you may have unintentionally adopted the active methods of this thread to goose your return. Maybe you are a "closet" active investor/trader. BGR, welcome to the dark side if that is so. Regards, Simba

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