Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Sterner who wrote (6604)	1/18/1999 7:02:00 AM
From: LastShadow	Read Replies (2) \| Respond to of 43080

Comments In 1982, there was $75 billion in equity funds. Today there is $2.75 trillion. So in 17 years folks have invested at an average rate of over $13 billion a month. In the October 87 crash, the market lost half its value, or approximately half a trillion dollars. A similar crash now, 12 years later, would equate to 30% more than the entire market was worth back then. PFE is looking to patent a Viagra nasal spray for instantaneous infustion into the bloodstream. This should cause some appreciable price action tomorrow. Modified Value Cost Averaging for Mutual Funds: Dollar Cost Averaging - One puts a standard amount per week/month into the fund, thereby buying more shares when the price is low and fewer when its high. A $100 a month for comparisons below. Value Cost Averaging - one buys shares based on the price change of the fund. Starting at some baseline, say $100 a wek, if the NAV of the fund goes up 5% one week, you buy 5% less (or $95). If it goes down say 3$, you buy 3% more ($103). This leverages the ability to buy more shares lower and fewer shares at a higher price. From my analysis, one ends up depositing about the same per year as the Dollar Cost Averaging method. Modified Value Cost Averaging - an accelerated method where one buys times times the % change each period. So if the Net Average Value goes down 5%, you buy 50% more($150), and if it goes down 4%, you buy 40% less ($60). In the last five years I have been doing this, it has always put less money in than the other two methods - the difference I deposit during the first correction of the year. It takes a tiny bit of effort to calculate the number each week, but if over 20 years the average return for the fund is 15%, the Value Cost Averaging method will generate about 20% and the modified method will be around 45%. I believe it would be a simple matter to Modify Gary Walter's 401k spreadsheets on the website to accomodate that calculation. I will post the example files to support these estimates later today or tomorrow. One last point, though, just moving the funds to money markets/fixed income funds during corrections (assuming they follow the general direction of the larger indices - ie, up when they are up, down when they are down - not necessarily to the same extent), provides a substantial improvement in year to year gains - see the screenshots on the website at home.earthlink.net lastshadow