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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Investor2 who wrote (4402)3/31/1998 11:20:00 PM
From: Ken Brown  Read Replies (2) | Respond to of 42834
 
>>Dollar cost averaging does not work if the long term direction of a stock (or market) is down.<<

That depends on your definition of "work". True, it doesn't give you a profit in a down market - but it does lower your loss. The reason is obvious, so I won't bother with an example.

I think DCA also works in up markets, because of people's tendency (as Bob has said so often lately) to want to "lump sum", the higher the market goes. DCA prevents one from dumping all one's money at Dow 9000, just as the market is about to correct 12% ... thereby causing that same poor soul to take *out* all that money, at the bottom of the correction.

Ken



To: Investor2 who wrote (4402)4/1/1998 8:11:00 AM
From: Steve Hallam  Read Replies (2) | Respond to of 42834
 
I'm not sure what you mean by "works." What I mean is DCA beats lump summing -- more so in a down a market than a sideways market. In
a down market both strategies would lose money. DCA would lose less.


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