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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (96977)	7/24/2002 5:47:10 PM
From: Simba	Read Replies (1) \| Respond to of 132070

twfowler: I disagree. First of all you are incorrect in saying this: but the gross return of someone who DCA's in to a 6% fixed yield investment would be less then 32% Go to Microsoft Excel and punch in this series of cash flows from 1993 (assumed constant $100 per year): -100 -100 -100 -100 -100 -100 -100 -100 -100 1188 (which equals the total DCA investment of $900 multiplied by 1.32 as per my claim of gross return of 32%) The call the IRR (Internal Rate of Return) function on this series. You will get 6% confirming the 6% constant yield. That confirms my calculations as shown in the chart of 32% gross DCA yield into a 6% instrument from 1993. As to the 18% return for the SP500 DCA including dividends, that is also correct although unbelievable for some one who cannot do the math like you. When you DCA into stocks you do buy more shares at the lower prices but you have to remember the Sp500 is below 1997 low, therefore you were throwing hard earned money to buy very few shares during the mania 1997-2000, which are all under water. Also all the shares you purchased from 2000 - 2002 are also under water. The only shares in the money are the ones from 1993 to 1997. My chart is correct and is confirmed by the independent calculations of these people who run a hedge fund: cross-currents.net I think you need to take some advanced classes in finance math to understand. I can sympathize with you if you hava used the DCA all these years and ended up with a paltry return. Go back and read my post again. I am not talking about "gross" return for a one-time buy at the beginning of 1993. We are not comparing a one-time buy Vs. DCA. When I say gross returns it is the gross return on the capital if you did a DCA into Sp500 or a 6% constant yield investment. Do you understand what a 6% constant yield instrument? This means every week you invest via DCA you are assured 6% per annum on that investment in the future. One way to do this is to buy new 6% CD's every week if you can get hold of one. Have you heard GIC (Guaranteed Insurance Contracts). They are also called "Stable value funds" and they return constant percent for years depending on the contract. Obviously long-term bond yields can fluctuate quite a bit. For example the Vanguard GNMA fund is an intermediate term bond fund that has yielded close to 7% compound annual for the past 10 years with little or no change in principal values. Simba