Because I’m a net purchaser, and will be for some time, I get disappointed when my stocks rise in value.

If we can think logically about investing (not an easy thing to do) and remove our hearts from the equations, I think it makes things a whole lot easier. I loved the market crash we had last year. Yet–it frustrated me too, because it didn’t last long enough. So, because I was frustrated, I can’t claim to be an investment Buddha either.

Andrew Hallam

I’d say up front though, that you’d need to diversify too. Like you said DCA on Enron wouldn’t have helped. I like to gamble and I would consider an individual stock just that, a gamble, not an investment. I use two different strategies for the two things and I can afford to lose my gambling money, but not my investments.

Your question is an excellent one. Sorry about the half thought out comments.

I was referring to the length of time it would take for a sum that was broadly invested in the stock market to recover back up to the previous market peak. 1929 was a worse case scenario. A $1000 value at the peak in 1929 took about 25 years to get back to that level (ignoring dividends). Sometimes bear markets go deep and recover quickly like in 1987, at other times they can drag on for many years.

We are not guaranteed to receive dividends or to see the same or higher price at points well into the future for any particular stock. BMO appears to be one of best stocks but never say never.

There is market risk…what the averages do and there is individual stock risk.

The main averages have always recovered in part because “bad stocks” are culled on a regular basis and replaced by the latest fad stocks.

The stock culling and replacement activity makes the stock market indexes look less risky than they really are. In other words…the market indexes are not “good science”. The bad data is removed from the experiment.

Individual stocks have the risk of never ever recovering after a severe downturn….Enron etc.

I would be interested in reading more about Dollar Cost Averaging and how one might do going through a long bear market period. Could you do a post with some numbers based on actual market history, perhaps on your blog??

Seems to me…if we assume that individual stocks will always recover we are either uninformed or not being honest with ourselves.

For example, how would dollar cost averaging have worked for the dot.com stocks, say if one began investing in 1985 or 1998? Another question I have is would someone who had began DCA in the Nasdaq in 1985 or 1998 have maintained that discipline throughout the bear?

What works on paper does not always pan out when the rubber hits the road.

Having said all that…I think DCA may well be the best “theoretical approach” to “timing the market” if it is done on a broad market index basis. I would really like to see some scenarios.

I had the luck to have seen my co-workers go nuts over the market through the peak (2000) back then and watched them “go silent” as the market crashed. That was as interesting to watch as any movie I have seen.

Nadaq history at
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=nasdaq&sid=0&o_symb=nasdaq&freq=2&time=20

There’s always that possibility that something is going inherently wrong for a company, but for the most part, I could deal with not looking at any of my portfolio’s stock values for months on end. As long as that divvy gets parked in my account, I’m normally a happy camper!

I hear you on the BMO example I just got their 192nd annual report in the mail the other day. 192nd! Do you think I’m gonna dwell on the value of it’s stock and wonder if its going to go down or up a $1 in the next few weeks?

To answer your question – you should be able to do it if you’re comfortable with your stocks.

Great thread. Keep up the good work.

1) I agree with Think Dividends. If you’re planning on holding a stock long term, the entry point is almost irrelevant. You certainly don’t want to get hosed by buying at an inflated price, but ultimately if you’re holding the stock long enough, it should be valued much higher at your end point.

2)Try just looking at your stock price when you want to calculate your net worth statement. It might even be a fun surprise each month, because you’ll be relatively clueless as to which direction and by how much your stock value changed.

Great post, keep them coming.