Wow, this video really breaks down the power of dollar-cost averaging! It's incredible how this strategy helps take the emotion out of investing and allows us to capitalize on market fluctuations. The steady, disciplined approach not only reduces risk but also takes advantage of those market dips that cause stress. Here's to growing wealth over time! 🌱🚀
Thank you for your comment. I'm pleased to hear that you found the video valuable. The challenge now lies in maintaining a sense of calm, viewing these periods as normal, and recognizing them as opportunities for investors with a longer-term perspective.
Remember that when the market is declining or experiencing a challenging year, we don't need to feel pressured to come up with short-term solutions. Take a look at this video and let me know your thoughts.
"These bad times are really your best times." I am pretty sure that is a zen quote of some sort. The specific examples provide great insight into what happens long term so that one doesn't zoom in on a particular instance. Thanks for sharing all your knowledge that helps us stay calm and see those down turns as good shopping days.
Thank you for sharing your comment. Society, the news, and social media all make it a bit more difficult, but hopefully, we can remain calm and just stick with the strategy.
Mike, you demonstrated that so well! This information is so useful when everyone is freaking out in a downturn, just seeing this takes all that fear mongering away for me!
Thanks Mike! This is the exact information I’ve been looking for. Some videos on TH-cam say lump sum is better than DCA, but they only give the example for the up trend market. I wanted to know what if market goes down and then went up, but didn’t return the price one started investing. The three scenarios you illustrated answered my questions. I have some money saved, I wanted to invest in the stock market to beat the inflation, but stock market is at all time high, which makes me nervous to put all money in the index ETF in lump sum.
Thanks for the comment and checking out the video. I'm glad you found it helpful. If you haven't been in the market recently, I understand that it can feel unsettling to start investing after an uptrend. However, trying to 'time' the market is never a good idea either. For a long-term investor who is dollar-cost averaging, those down markets can be great opportunities to buy when things are on sale. I have a video discussing lump-sum investing vs. dollar-cost averaging and another on how we can be better investors than most professionals. In case you're interested, here are the links: Lump-sum: th-cam.com/video/V0m8r2Ft7kY/w-d-xo.html Invest Better: th-cam.com/video/FqKCDqcOqWg/w-d-xo.html
@@MikesFinancialEdge I have a lump sum of cash in a rollover IRA I recently transferred from a 401k account after I changed my job. It's just too nerve-racking to put all hard-earned money into the stock all at once. I know it's most likely I'll get less return by doing DCA compared to the lump sum. As long as I can beat the inflation, I'm happy.
It's certainly important to be able to sleep at night! The market can be volatile, and no one can predict what will happen in the short term. Additionally, currently, there are many high-yield savings accounts paying around 5 to 5.5% interest. Thus, that's a safe place to park some money while you are waiting to invest it differently.
Thank you for your comment! I appreciate you taking the time to check out some of the videos and share your thoughts. I’m glad to hear you’re enjoying the content.
As always, really great video. Thanks! Two follow up questions if I may: 1- For a person having a little extra cash laying around and already doing dollar cost averaging, do you recommend investing the extra cash in times of market downturn in addition to the automatic monthly investment? It might sound like a no-brainer but it technicality defeats the purpose of DCA, which is not caring what the market is doing, which in turn, keeps emotions out of the picture. 2- What are your thoughts on dollar cost averaging over all or most individual sectors of the market using low cost ETFs instead of S&P500? The idea is to put the same dollar amount in each sector every month. Right now the Information technology sector of the index is the heaviest (or most expensive) while some other sectors may not do very well. So, in this way, more shares of the cheaper sectors of the market will be purchased instead of following the current composition of the index. Could it yield an edge?
Thank you - Glad you liked the video. As highlighted in the video, one significant advantage of Dollar-Cost Averaging (DCA) is its ability to alleviate stress and prevent emotional mistakes during market corrections. Instead of succumbing to panic, more individuals can hopefully maintain a relaxed demeanor and, perhaps, even anticipate & look forward to such periods, especially if they are long-term investors. The notion of timing the market and pinpointing the ideal moments to buy is inherently flawed. Nevertheless, during market downturns, there's certainly nothing wrong with viewing them as opportunities to invest a bit more while the market is low. Naturally, if we initiate this process, the market might continue to decline further, but the idea is to buy as the market experiences a dip, so to speak. Therefore, if one can reduce expenses in their budget and invest more during market downturns, that would be an excellent strategy. Of course, it's always wise to save and invest more. As for your second question, while the S&P 500 boasts a strong track record, we should exercise caution when assuming we know which sectors are undervalued. Sometimes, certain sectors are undervalued for valid reasons. Examining particular sectors over the past decade, the technology sector has consistently outperformed other sectors by a wide margin, despite many value investors believing it was overvalued. Additionally, there are equally weighted ETFs for the S&P 500 that one can consider. Have you had a chance to watch my video that covers various details about investing in the S&P 500? If not, here's the link: th-cam.com/video/LL-lkcM1_4U/w-d-xo.html
Hi, thanks for the video. Is it possible to make a DCA scenario with much gain and a huge crash just before the end of investment period (like retirement)? How does the portfolio than looks like? Thanks in advance and regards
We should always keep in mind that market corrections or more prolonged downturns can happen at any time for various reasons. If we consider one of the worst periods, like the housing crisis, it took approximately 5 years for the market to fully recover. As the video highlights, that period can be an excellent time to invest, but if someone was in or near retirement, their investing horizon might be over. In such a case, we wouldn't want to be in a position where we need to sell and use money that was invested in stocks during such a downturn. It's important to have time to ride it out. Thus, when someone is nearing or in retirement, they should keep in mind that any money they may need to use in the next 3-5 years probably shouldn't be in stocks, especially if they don't have other sources of income. However, every person has unique circumstances, and seeking guidance from a financial fiduciary to develop a sound strategy can be beneficial. You might also like checking out my video on asset allocation and risk tolerance at different stages in life. Here's a link: th-cam.com/video/EMHi0yhc3ZA/w-d-xo.html
Yes, every 6 weeks would be perfectly fine. Using monthly intervals is common because people tend to think in terms of a monthly budget due to their paycheck. However, what's important is sticking to a regular schedule, whether the market is up or down.
Hi Mike, my online broker recently just enable fractional share trading so glad that I can finally doing DCA, but they ask me to sign a page of terms and conditions before using, it also read that this fractional feature is unlike other whole share trading, because it's on principal capacity, and potential loss to clients and gains to the broker, (that's what the page contents listed)and the fractional shares you bought cannot be withdrawn or transferred to other broker, can you help me to understand more about this? Any risks associated with this broker on principal capacity or should I avoid it, find other broker .. thanks a lot!
What online broker do you use? Fidelity, Schwab, and Vanguard all allow fractional shares. Some online brokers are not the best to use. If I remember correctly, currently Schwab only allows it on S&P 500 stocks, Vanguard allows it on ETFs, and Fidelity allows it on both. It is common to not be able to roll fractional shares to another account, but you could roll the whole shares portion. If you are interested in something like the S&P 500, the ETF SPLG is only around $59 right now. Thus, one full share doesn't cost too much.
@@MikesFinancialEdge I live in Singapore, we use a local broker moo moo, a cheap online broker, yes I DCA on VOO stock, actually my main concern is that they act as principal capacity, not sure if any potential risks with that, if it's just like a normal agency capacity, I wouldn't mind using it..
I am certainly not familiar with that broker, but when a broker acts in a principal capacity regarding fractional shares, it means that the broker is facilitating the trade using its own inventory of shares rather than matching buyers and sellers directly. It's essential to understand any associated fees or pricing models that may apply in such transactions. When only buying fractional shares, you certainly do not want any fees associated with the trade! Maybe switch to the SPLG for future purchases. It's identical to VOO and it only costs around $59 per share. Thus, it is much easier to buy a full share.
@@MikesFinancialEdge thanks Mike, now I understand what those terms meant.... I have one last question: I want to put $500 each month in S&P 500, I feel like with a fix amount that would be easy for me to DCA, if buying SPLG full share then it cannot have $500 fully invested, because the share price are always up and down, unless it's a divisible number to $500, like 50, 100, 250 etc.. I not sure if that could eventually effect my long term gains, Comparing to a fix amount invested vs Full share..
For the SPLG, you could currently buy 8 shares per month. If there is a little bit left over, that's really not a problem. It gets added to the next month's $500. Every few months you can buy 9 shares. Just buy as many shares as you can with the $500 and you can always own full shares.
Hi Sir, I want to invest $500 monthly in VOO using the DCA strategy, but my local broker (Singapore) allows only full share purchases, which cost $410 each at the current price. I'm left with $90, not enough for the second share. Any alternatives to invest $500 monthly without buying two full shares? Like you mentioned in the video.. no matter what the current price of a stock, you only invest 500 bucks each time on a regular basis, , and I hope I have asked my question correctly.. I am a newbie and just started investing in early 2023 😊
I have included a video I made about investing in the S&P 500 below. It details a lot of information that might be helpful to you. The video also recommends several ETFs one can use to invest in the S&P 500. Any of the ones recommended are excellent choices and offer the same investment. The VOO ETF is just one of them, but, as you mentioned, it comes in at a higher price per share. Another one is the SPLG, and it comes in at a current price per share of around $53.40. Thus, in your example, you could purchase 9 shares every month and occasionally have enough left over to buy 10. Anyway, check out the video below. Hope that helps and thanks for watching the video. An ETF for the S&P 500: th-cam.com/video/LL-lkcM1_4U/w-d-xo.html
What do i do if i have a payment period while DCA? Say i invest 200 into an index every week, but miss two or 3 weeks due to emergencies throughout the year.
If emergencies happen and you miss a few weeks or even a month now and then, I would not worry about it at all. Just try to be as consistent as possible and not worry about the best time to buy. If you miss a month, just get back to investing when you can. Some people invest every quarter, and that is fine too. Thanks for checking out the video and leaving a comment. Let me know if you have any other questions.
If you're asking if you should DCA on a regular basis (like how people fund their 401K) then the answer is YES!! Invest as soon as you have money (each payday). TIME IN the market is always more beneficial than trying to TIME the market. However, if you HAVE A LUMP SUM and you're wondering HOW to put it into the market, then DCA is an absolutely horrible idea.
I agree that lump-sum wins out. The data and research supports lump-sum investing over DCA. However, few people have a lump sum to invest all at once, so for most people trying to save and invest every month is very beneficial, and in that case, they should not be trying to figure out when to buy. Just be consistent and do it on a regular basis. Actually, DCA through a 401K is how many people become millionaires. For those with a lump sum, it's always a common question about putting it in all at once. Thus, I do have a video comparing lump-sum investing with DCA, covering the research and data a person should know. If interested, here it is: th-cam.com/video/V0m8r2Ft7kY/w-d-xo.html Anyway, thanks for checking out the video. I see you have some on similar topics and I'll check them out.
Can you make a video on Michael Burry’s recent $1.6B bet on the market crashing? I knowfor long term investors, you shouldn’t worry. Just want to see your thoughts! Love the videos!
That would be an interesting topic. I saw where that made a view headlines. Thanks for the suggestion - I might add that to the list of ideas. I don't mention him specifically, but I do have a video on somewhat of a related topic you might like. It's about investing better than professionals and fund managers. If interested, here's a link: th-cam.com/video/FqKCDqcOqWg/w-d-xo.html
Sorry - I had replied to your comment earlier, but it must not have saved. Anyway, yes, I do think VUSXX is a solid money market fund to use for emergency funds.
Wow, this video really breaks down the power of dollar-cost averaging! It's incredible how this strategy helps take the emotion out of investing and allows us to capitalize on market fluctuations. The steady, disciplined approach not only reduces risk but also takes advantage of those market dips that cause stress.
Here's to growing wealth over time! 🌱🚀
Thank you for your comment. I'm pleased to hear that you found the video valuable. The challenge now lies in maintaining a sense of calm, viewing these periods as normal, and recognizing them as opportunities for investors with a longer-term perspective.
Remember that when the market is declining or experiencing a challenging year, we don't need to feel pressured to come up with short-term solutions. Take a look at this video and let me know your thoughts.
"These bad times are really your best times." I am pretty sure that is a zen quote of some sort. The specific examples provide great insight into what happens long term so that one doesn't zoom in on a particular instance. Thanks for sharing all your knowledge that helps us stay calm and see those down turns as good shopping days.
Thank you for sharing your comment. Society, the news, and social media all make it a bit more difficult, but hopefully, we can remain calm and just stick with the strategy.
Deserves way way way more subscribers
Thank you for the comment.
Mike, you demonstrated that so well! This information is so useful when everyone is freaking out in a downturn, just seeing this takes all that fear mongering away for me!
Great - Now the trick is to remember all this when it is actually happening. Thanks for the comment!
Thanks Mike! This is the exact information I’ve been looking for. Some videos on TH-cam say lump sum is better than DCA, but they only give the example for the up trend market. I wanted to know what if market goes down and then went up, but didn’t return the price one started investing. The three scenarios you illustrated answered my questions. I have some money saved, I wanted to invest in the stock market to beat the inflation, but stock market is at all time high, which makes me nervous to put all money in the index ETF in lump sum.
Thanks for the comment and checking out the video. I'm glad you found it helpful. If you haven't been in the market recently, I understand that it can feel unsettling to start investing after an uptrend. However, trying to 'time' the market is never a good idea either. For a long-term investor who is dollar-cost averaging, those down markets can be great opportunities to buy when things are on sale. I have a video discussing lump-sum investing vs. dollar-cost averaging and another on how we can be better investors than most professionals. In case you're interested, here are the links:
Lump-sum: th-cam.com/video/V0m8r2Ft7kY/w-d-xo.html
Invest Better: th-cam.com/video/FqKCDqcOqWg/w-d-xo.html
@@MikesFinancialEdge Hi Mike, thanks for the two recommended two videos. I watched both of them. Very helpful!
@@MikesFinancialEdge I have a lump sum of cash in a rollover IRA I recently transferred from a 401k account after I changed my job. It's just too nerve-racking to put all hard-earned money into the stock all at once. I know it's most likely I'll get less return by doing DCA compared to the lump sum. As long as I can beat the inflation, I'm happy.
Great - Glad you feel they were helpful!
It's certainly important to be able to sleep at night! The market can be volatile, and no one can predict what will happen in the short term. Additionally, currently, there are many high-yield savings accounts paying around 5 to 5.5% interest. Thus, that's a safe place to park some money while you are waiting to invest it differently.
Great video to watch on a regular basis to remain calm during the market corrections,
Glad it helps!
Successful investor in the market and I must say Mike has amazing videos! Very knowledgeable and well thought out explanation.
Thank you for your comment! I appreciate you taking the time to check out some of the videos and share your thoughts. I’m glad to hear you’re enjoying the content.
Nice information Mike
Thanks 👍
Great content! People need to watch this!
Thanks for the comment!
Thank you for the video, very powerful.
Nice to hear you liked the video. Thank you for sharing and leaving a comment.
Very informative! Thank you!
Great - Glad you found it informative and worth your time. I appreciate the comment!
Great vid. Thanks.
Thanks for checking it out and leaving the comment. Glad you liked it.
Thank you
You're very welcome! Happy to hear you liked it.
thank you !
Thank you for checking out the video. I appreciate it and I'm glad you liked it. Thanks for the comment!
Great content
As always, really great video. Thanks! Two follow up questions if I may:
1- For a person having a little extra cash laying around and already doing dollar cost averaging, do you recommend investing the extra cash in times of market downturn in addition to the automatic monthly investment? It might sound like a no-brainer but it technicality defeats the purpose of DCA, which is not caring what the market is doing, which in turn, keeps emotions out of the picture.
2- What are your thoughts on dollar cost averaging over all or most individual sectors of the market using low cost ETFs instead of S&P500? The idea is to put the same dollar amount in each sector every month. Right now the Information technology sector of the index is the heaviest (or most expensive) while some other sectors may not do very well. So, in this way, more shares of the cheaper sectors of the market will be purchased instead of following the current composition of the index. Could it yield an edge?
Thank you - Glad you liked the video.
As highlighted in the video, one significant advantage of Dollar-Cost Averaging (DCA) is its ability to alleviate stress and prevent emotional mistakes during market corrections. Instead of succumbing to panic, more individuals can hopefully maintain a relaxed demeanor and, perhaps, even anticipate & look forward to such periods, especially if they are long-term investors. The notion of timing the market and pinpointing the ideal moments to buy is inherently flawed. Nevertheless, during market downturns, there's certainly nothing wrong with viewing them as opportunities to invest a bit more while the market is low. Naturally, if we initiate this process, the market might continue to decline further, but the idea is to buy as the market experiences a dip, so to speak. Therefore, if one can reduce expenses in their budget and invest more during market downturns, that would be an excellent strategy. Of course, it's always wise to save and invest more.
As for your second question, while the S&P 500 boasts a strong track record, we should exercise caution when assuming we know which sectors are undervalued. Sometimes, certain sectors are undervalued for valid reasons. Examining particular sectors over the past decade, the technology sector has consistently outperformed other sectors by a wide margin, despite many value investors believing it was overvalued. Additionally, there are equally weighted ETFs for the S&P 500 that one can consider. Have you had a chance to watch my video that covers various details about investing in the S&P 500? If not, here's the link: th-cam.com/video/LL-lkcM1_4U/w-d-xo.html
@@MikesFinancialEdge Thanks for the response! I'll check that video out.
Hi, thanks for the video. Is it possible to make a DCA scenario with much gain and a huge crash just before the end of investment period (like retirement)? How does the portfolio than looks like?
Thanks in advance and regards
We should always keep in mind that market corrections or more prolonged downturns can happen at any time for various reasons. If we consider one of the worst periods, like the housing crisis, it took approximately 5 years for the market to fully recover. As the video highlights, that period can be an excellent time to invest, but if someone was in or near retirement, their investing horizon might be over. In such a case, we wouldn't want to be in a position where we need to sell and use money that was invested in stocks during such a downturn. It's important to have time to ride it out. Thus, when someone is nearing or in retirement, they should keep in mind that any money they may need to use in the next 3-5 years probably shouldn't be in stocks, especially if they don't have other sources of income. However, every person has unique circumstances, and seeking guidance from a financial fiduciary to develop a sound strategy can be beneficial.
You might also like checking out my video on asset allocation and risk tolerance at different stages in life. Here's a link: th-cam.com/video/EMHi0yhc3ZA/w-d-xo.html
Excellent answer! Thank you very much :)
Mike, is it just as effective to DCA every 6 weeks over a 30 year period instead of every month?
Yes, every 6 weeks would be perfectly fine. Using monthly intervals is common because people tend to think in terms of a monthly budget due to their paycheck. However, what's important is sticking to a regular schedule, whether the market is up or down.
Very well explained. Thanks.
Thanks for checking out the video and thanks for the comment.
Hi Mike, my online broker recently just enable fractional share trading so glad that I can finally doing DCA, but they ask me to sign a page of terms and conditions before using, it also read that this fractional feature is unlike other whole share trading, because it's on principal capacity, and potential loss to clients and gains to the broker, (that's what the page contents listed)and the fractional shares you bought cannot be withdrawn or transferred to other broker, can you help me to understand more about this? Any risks associated with this broker on principal capacity or should I avoid it, find other broker .. thanks a lot!
What online broker do you use? Fidelity, Schwab, and Vanguard all allow fractional shares. Some online brokers are not the best to use. If I remember correctly, currently Schwab only allows it on S&P 500 stocks, Vanguard allows it on ETFs, and Fidelity allows it on both. It is common to not be able to roll fractional shares to another account, but you could roll the whole shares portion. If you are interested in something like the S&P 500, the ETF SPLG is only around $59 right now. Thus, one full share doesn't cost too much.
@@MikesFinancialEdge I live in Singapore, we use a local broker moo moo, a cheap online broker, yes I DCA on VOO stock, actually my main concern is that they act as principal capacity, not sure if any potential risks with that, if it's just like a normal agency capacity, I wouldn't mind using it..
I am certainly not familiar with that broker, but when a broker acts in a principal capacity regarding fractional shares, it means that the broker is facilitating the trade using its own inventory of shares rather than matching buyers and sellers directly. It's essential to understand any associated fees or pricing models that may apply in such transactions. When only buying fractional shares, you certainly do not want any fees associated with the trade! Maybe switch to the SPLG for future purchases. It's identical to VOO and it only costs around $59 per share. Thus, it is much easier to buy a full share.
@@MikesFinancialEdge thanks Mike, now I understand what those terms meant.... I have one last question: I want to put $500 each month in S&P 500, I feel like with a fix amount that would be easy for me to DCA, if buying SPLG full share then it cannot have $500 fully invested, because the share price are always up and down, unless it's a divisible number to $500, like 50, 100, 250 etc.. I not sure if that could eventually effect my long term gains, Comparing to a fix amount invested vs Full share..
For the SPLG, you could currently buy 8 shares per month. If there is a little bit left over, that's really not a problem. It gets added to the next month's $500. Every few months you can buy 9 shares. Just buy as many shares as you can with the $500 and you can always own full shares.
Hi Sir, I want to invest $500 monthly in VOO using the DCA strategy, but my local broker (Singapore) allows only full share purchases, which cost $410 each at the current price. I'm left with $90, not enough for the second share. Any alternatives to invest $500 monthly without buying two full shares? Like you mentioned in the video.. no matter what the current price of a stock, you only invest 500 bucks each time on a regular basis, , and I hope I have asked my question correctly.. I am a newbie and just started investing in early 2023 😊
I have included a video I made about investing in the S&P 500 below. It details a lot of information that might be helpful to you. The video also recommends several ETFs one can use to invest in the S&P 500. Any of the ones recommended are excellent choices and offer the same investment. The VOO ETF is just one of them, but, as you mentioned, it comes in at a higher price per share. Another one is the SPLG, and it comes in at a current price per share of around $53.40. Thus, in your example, you could purchase 9 shares every month and occasionally have enough left over to buy 10. Anyway, check out the video below. Hope that helps and thanks for watching the video.
An ETF for the S&P 500: th-cam.com/video/LL-lkcM1_4U/w-d-xo.html
@@MikesFinancialEdge this is helpful sir, thanks a lot
@@herewego..VFIAX allows you to invest any dollar amount. It's an S&P 500 mutual fund not an ETF.
What do i do if i have a payment period while DCA? Say i invest 200 into an index every week, but miss two or 3 weeks due to emergencies throughout the year.
If emergencies happen and you miss a few weeks or even a month now and then, I would not worry about it at all. Just try to be as consistent as possible and not worry about the best time to buy. If you miss a month, just get back to investing when you can. Some people invest every quarter, and that is fine too. Thanks for checking out the video and leaving a comment. Let me know if you have any other questions.
@@MikesFinancialEdge Thank you Mike!
You're very welcome!
If you're asking if you should DCA on a regular basis (like how people fund their 401K) then the answer is YES!! Invest as soon as you have money (each payday). TIME IN the market is always more beneficial than trying to TIME the market.
However, if you HAVE A LUMP SUM and you're wondering HOW to put it into the market, then DCA is an absolutely horrible idea.
I agree that lump-sum wins out. The data and research supports lump-sum investing over DCA. However, few people have a lump sum to invest all at once, so for most people trying to save and invest every month is very beneficial, and in that case, they should not be trying to figure out when to buy. Just be consistent and do it on a regular basis. Actually, DCA through a 401K is how many people become millionaires. For those with a lump sum, it's always a common question about putting it in all at once. Thus, I do have a video comparing lump-sum investing with DCA, covering the research and data a person should know. If interested, here it is: th-cam.com/video/V0m8r2Ft7kY/w-d-xo.html Anyway, thanks for checking out the video. I see you have some on similar topics and I'll check them out.
Common sense ppl like mike r gem in sewer alike TH-cam…😂😂😂
Glad you like the videos.
Can you make a video on Michael Burry’s recent $1.6B bet on the market crashing? I knowfor long term investors, you shouldn’t worry. Just want to see your thoughts! Love the videos!
That would be an interesting topic. I saw where that made a view headlines. Thanks for the suggestion - I might add that to the list of ideas. I don't mention him specifically, but I do have a video on somewhat of a related topic you might like. It's about investing better than professionals and fund managers. If interested, here's a link: th-cam.com/video/FqKCDqcOqWg/w-d-xo.html
Do you feel that VUSXX is as safe as HYSA for an emergency fund?
Sorry - I had replied to your comment earlier, but it must not have saved. Anyway, yes, I do think VUSXX is a solid money market fund to use for emergency funds.