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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (517)	7/16/1998 4:34:00 PM
From: porcupine --''''>	Read Replies (2) \| Respond to of 1722

Let me refocus: I'm talking about the average investor -- the (hopefully) conservative investor. I agree with an earlier comment of yours that our job is to add value to what might be obtained from a completely passive investment strategy that ignores Intrinsic Value. But, many readers, understandably, want to invest on their own. In this light, my prediction remains that over the 20+ year time frame that people are typically investing for, very few part-time investors will be able to outperform dollar-cost-averaging into a low-fee Indexing product. But purchases made in the 1927-1929 period were under water or close too it 20 years later. Not if they had dollar-cost-averaged. As mentioned elsewhere, near the beginning of The Intelligent Investor, Graham calculates ("roughly" as he puts it) that dollar-cost-averaging into the DJIA every January for 20 years, commencing January 1929, would have produced an average annual return of 8%. I know of no other asset class that would have performed this well. I no longer have access to the WSJ article which reported it, but I believe it was Market historian Jeremy Siegel who has shown that a similarly modest, but satisfactory, outcome would have resulted with a program begun in 1972. These are not the spectacular results the greats have achieved. But, something that rarely gets mentioned is that the vast majority of investors don't obtain "average" results. They get underaverage results. A few geniuses get spectacular results, and when the two are added, you get the "average". My guess is that over a twenty year period the market will offer enough spectacular buying opportunities and the risk premiums offered in general will eventually lead to superior returns over other asset classes. If you are dollar cost averaging you will almost always be making purchases of super bargains at some point in a 20 year period that will lead to a net total of outperformance. I think we both agree that investors who follow the course of dollar-cost-averaging into an Index product over the next 20 years will beat all but a small percentage of other investors. ....If you wait long enough, value means almost nothing. REMEMBER THIS IS MR. VALUE TALKING!!! An interesting point, and one near and dear to the hearts of the Efficient Markets/Modern Portfolio crowd. In his last years, Graham started to come around to this way of thinking, which Buffett found disheartening -- but, of course, not so disheartening as to give up trying. ....Buffett....Lawrence Tisch....Joe Steinberg....Bill Ruane....Templeton..... The average individual investor, even if he or she has the same degree of talent, doesn't put in the kind of hours the immortals do. Once again, I don't have access to the article, but missing the one best month in every year (easy to do when you're moving in and out of the Market based upon some formula) reduces average annual returns by 5%. I would be loathe to recommend that someone try to beat these odds from home. If I can find the cash study I was talking about, I'll post the facts. Is this versus dollar-cost-averaging? porc --''''> web.idirect.com