Dollar Cost Averaging Pros and Cons

Hi folks. Time flew very fast and we have reaching the end of May. With the economy recession still in place, I believe our tough time might have some more time to go through. So good luck to all of us.

Today, I would like to touch on the an investment strategy, Dollar-Cost Averaging, or people used to name it 'DCA'. You might have already knew, dollar-cost averaging in fact is a popular investment strategy where you invest a fixed dollar amount at a pre-determined intervals. Simply say, when the markets are up, you buy fewer shares per dollar invested due to the higher cost per share. When the markets are down, you buy a greater number of shares per dollar invested. This strategy allows us to get an average cost per share over time, meaning you don't have to invest the time and effort to monitor market movements and strategically time your investments.

This is the DCA we talking about today.

Okay I think it's pretty clear what is DCA and how it works for now. Well, I believe you always told by brokers or unit trust agents that, if you invest fixed dollar amounts on a monthly basis regardless of price and theorectically, you'll come out with more shares for your investment, and you make more profits from this strategy. To be honest, I've using this strategy since year 2005 and I found out it does works under circumstances, but definitely it's not the best way to maximize my money.

According to Timothy Middleton, a writter of moneycentral articles, when the market is studied over long periods, dollar-cost averaging almost always produces lower returns than investing lump sums in diversified portfolios, and almost never reduces risk meaningfully. Calculation below are the evident he found:

Three ways to invest

Investment amount and fund net asset value by date Lump sum Dollar-cost averaging Random 1/2/2004 $3,000 at $25.94 $750 at $25.94 2/11/2004 $300 at $27.22 3/2/2004 $300 at $27.12 3/29/2004 $300 at $26.44 4/1/2004 $750 at 26.75 5/3/2004 $300 at $26.25 5/27/2004 $300 at $26.36 7/1/2004 $750 at 26.56 7/6/2004 $300 at $26.25 7/19/2004 $300 at $25.85 9/9/2004 $300 at $26.29 9/29/2004 $300 at $26.23 10/1/2004 $750 at 26.65 10/27/2004 $300 at $26.61 Closing NAV $28.55 $28.55 $28.55 Total investment $3,000 $3,000 $3,000 Value on 12/27 $3,351 $3,294 $3,315 Total return 11.7% 9.8% 10.5%

Notes: Vanguard Total Stock Market Index fund. As of 12/27/2004.

Assumes total investment of $3,000. Total returns include reinvested dividends as follows: 8 cents on 3/26; 9 cents on 6/25; 9 cents on 9/24 and 18.5 cents on 12/23.

Sources: Lipper, MSN Money, Microsoft Money

DCA always illustrated in capture lower prices along the way but finish nicely ahead.

According to Tim, what dollar-cost averaging has become is a salesman's tool to prize away in small increments the larger sum he couldn't talk you out of in the first place. But if that's what it takes to get you to invest, so be it.

Even Phil Town, the best selling author of Rule #1 - The Simple Strategy for Successful Investing in Only 15 Minutes a Week, also complaint about the costly myth of dollar-cost averaging. He emphasized on why we need to buy when there is high cost per share. Will it be better we only buy when the cost is low?

In my opinion, be it DCA, random or lump sum strategy, we only can maximize our investment when we aim at the right time, come with a goal or plan. Since everyone saying we cannot predict the market and most of the time it will goes up and down, it doesn't mean we cannot do anything with it but to stick with DCA strategy. Lump sum investment results in better returns most of the time, because you have the money in the market longer. This is based on the idea that the longer you have your money in the market, the better your returns are over the long run, as shown in the table above.

You should buy and read this book if you haven't.

So what's left for DCA? Indeed, it is affordable for people who treat investing like paying a bill or loan. Some people do not afford to invest $5000 at a time, but they managed to do monthly installment of $417! See, this strategy is being used in everywhere such as monthly installment for car, TV, notebook, EPF contribution, insurance etc. We talk about affordable & convenience here!

I think I've bull shit too much, as I believe you must be better than me on this already. In summary, as what old man said, the bottom line is, whatever strategy you apply, investing is better than not investing. Cheers. :)

How Vendor Make Money from PC Fair

Hey, you must be hearing a lot of how bloggers make money online, how traders make money from stock market, how conman make money from scam and so on. How about how vendor make money from computer (PC) fair?

Perhaps some of you already knew about it. Well, as part of my entrepreneur experiences, I would like to share with you on the pre-requisition and strategies involved on how vendor make money from PC fair. To be honest, it's not easy for vendor to earn a penny in PC fair nowadays, due to great competition, price wars and every vendor also try to sell the same hot cakes. In the other hand, a success vendor can easily gain RM10-20k from 3 days PC fair. That's why multiple strategies have to be applied in order to win the battle.

PIKOM PC Fair is the largest PC fair in Malaysia.

What are the vital strategies for vendor to win the battle? let's look at some points below.

1. Large Capital & Low Price
First and foremost, you must have big capital, then you only able to sell your product in lowest price. You must ready sufficient cash flow to invest into the stocks in bulk, as you want to get special discount and rebate from the principal. This is crucial. When you have cost advantage, you can sell your product in lower price. Because this strategy is too popular, now every principal will comes out special packages to attract vendors to take from them. For example, 100 units of notebooks @ RM1,800 each. 70 to 99 units will be @ RM1,830, etc.

Normally vendor will force to take the best package with largest cost involved, even though they know they might not able to finish the stock. Well, this is where the big players taking advantage. Imagine they have many retails all over the places, some up to 5, some up to 10, they can spread the remaining stocks and sell it at a reasonable price easily. And they might not have to enter stock anymore after that. The only bad thing is your cash flow will stuck with the stocks.

Booth setup also very important to attract visitor eye sight.

2. Work close with Principal
Secondly, if you must lock down on certain product you want to sell, and then liaise with the principal for the best price vs volume, and ask for booth sponsor. In that way, you can cut down your cost significantly. Get the maximum credit term from the principal for your cash flow advantage.

Besides, you must also reserve the stock with the prinicipal as early as possible, to avoid other vendors grab your stocks and insufficient stock supply from principal.

3. Booth
Thirdly, you may try to get as many booth as you can, if you are selling more than 1 product, what we called booth diversification. As customers walk by and shop, your booths are having high probability of being shopped. That's why you can notice the same vendor is having multiple booths in different corners of the PC fair.

The location itself also very important. Some customers don't do product or price survey, because it is crowded, busy and warm most of the time. Once they get in to the PC fair, they will just buy whatever they spot and leave the fair. So if you get your principal booked the right booth for you, then you are the lucky one.

Distribution of flyers also 1 of the strategies to attract buyers.

4. Free Gifts
Never look down with the power of free gifts. It's a magic strategy every vendor apply every time. For example, a poster written "Buying a digital camera at RM899 with 10 free gifts!". It will definitely attract most of the visitors to have a look. The more people visit, the buying chance are great. And most of the people like free gift. According to the marketing strategy, free gift makes people think that they have earn additional thing from the product they paid for. In fact, the free gifts cost are already bundled within the product price. Well, this method is just works well until today.

5. Promoters
Finally, the promoters play the most important role in PC fair, just like any other field does. In PC fair, experience and sales-talk promoters able to boost up the sales significantly. The promoter must understand what they are trying to sell, so product and basic sales training are crucial for them. When the customer walk-by, they must catch every chance to promote the product and try to explain as much as they can, instead of just sitting or standing there to wait for the customer to approach to the booth. Well, that's why you must have as many as promoters you can around the PC fair, so they can bring the customer to your booths.

If possible, hiring some beauty models also can attract young visitors to visit to your booth, and trying to buy something from your booth in order to keep in touch with the models. For sure, I'll be the 1st visitor to do so. :)

See this promoter? It's too wrong that I don't take the flyer from her!

Okay, that's all for my sharing. Have a nice weekend, folks.

The Perfect Husband

Happy mother's day to all mothers around the world!

So, have you wish your mum already? And what gift had you contributed to your mum today? Okay, my post today is not about mother's day or the gift. I realized long time I didn't post a joke in my blog, so I would like to try one today. May be you've heard about it, but who care?

Here's the joke goes...

"Several men are in the locker room of a fitness club. A mobile phone on a bench rings and one of the men engages the hands free speaker function and begins to talk. Everyone else in the room are trying to listen.

Man: 'Hello?'

Woman: 'Honey, it's me. Are you at the club right now?'

Man: 'Yes'

Woman: 'I am at the central shopping center now and found a beautiful leather coat. It's only $800. Is it okay with you, if I buy it?'

Man: 'Sure, go ahead if you like it.'

Woman: 'And, I also stopped by a Mercedes dealership and saw the latest 2009 model of C200. I really liked it.'

Man: 'How much is it?'

Woman: 'It's a little bit expensive, $220,000.'

Man: 'All right. But for with this price, I want it with all the options included.'

Woman: 'Fantastic! Oh yes, one more thing honey, the bungalow I wanted last year is back on the market. Now they are asking for 30% extra of $3.5 millions!'

Man: 'Well, you may just go ahead and counter offer them at RM3 millions. They will probably take it. Otherwise, you can go for another $200k, if you think it is really a pretty good price.'

Woman: 'Brilliant! I'll see you later, honey. I love you so much!'

Man: 'I love you, too! Bye.'

The man hangs up the phone. The other men in the locker room are staring at him in astonishment, with their mouths agape. And surprisingly, the man turns around and asks: 'Anyone know who this phone belongs to?'"

The Rape of Nanking

When I opened my Email on last weekend, I accidentally received a forwarded email from a friend, with the topic of Nanking Massacre, and asked me to anti-Japanese. The pictures she attached in the Email immediately draw my attention. I heard about this incident before since I was young, but I did not bother much about it as there is no Internet access for me to find out more about this incident.

Basically the pictures in the Email depiciting on how Nanking massacre victims being killed and raped by the Japanese during 1937. From my understanding, Japanese managed to conquer Republic of China's capital, Nanking during Dec of 1937, but I have totally no idea what is happening during that time.

Nanking Massacre bodies flooded Yang Tze river.

I studied the history of World War II during my secondary school time. But it is just a brief one, where our education book only talks about how Adolf Hitler conquered and died, and how and how long Japanese dominated our country. Our history book did not mention about this incident at all, so I wonder whether this incident exist or not.

Out of my curiosity, I dig further on documentary web site, watch the documentary movie 'Nanking' and also the latest movie of 'Nanking! Nanking!' to further understand the incident. In the end of the day, I found out this can be highly true. The pictures have proved the incident, but also the Chinese victims, Chinese soldiers and Japanese soldiers to describe what had happen during the incident, according to the 'Nanking' documentary film.

Two idiot Japanese commanders competing on slaying number of Chinese heads.

Basically the Japanese army just spent 3 days to defeat the Chinese army and enter the city. Initially the Nanking General announced the city would not surrender and would fight to the death, by gathered about 100,000 untrained and low motivation soldiers. Low morale, troops in open flight, and an overwhelming enemy superiority in numbers caused the General to retreat across the Yangtze River after 3 days, without officially announcing any intention of surrendering the city to the Japanese military authorities.

Many orders given during the battle contradicted those of headquarters, and many more orders were simply ignored. The resulting chaos, compounded by the inadequacy of pre-battle preparations, gave Chinese soldiers little chance to escape the oncoming onslaught of the Japanese army. The defense plan fell apart from the very beginning because the defenders were overwhelmed by Chinese troops fleeing from previous defeats such as the Battle of Shanghai, and these troops just wanted to escape to safer ground and refused to obey any orders.

Chinese prisoners being buried alive by Japanese army.

From the history, we can know the problems of the Chinese troop and the Japanese army is too strong to be defeated. And unfortunately, the Japanese army had commited atrocities, such as killing, rapes, loot, arson and so on in Nanking city, with the unappropriate management from the commanders and poor discipline among the army. And there was about 300,000 casualites in Nanking, either massive killed by machine guns from the back, raped and killed, abused to death, snap by long knife and the head being cut while alive, and whatever the Japanese army likes. 80,000 women were raped and gang-raped, including infants and elderly.

However, whatever they had done, they have their karma. United States launched 2 nuclear bombs over Hiroshima and Nagasaki city of Japan to end the World War II at 1945. The bombs killed about 140,000 and 80,000 civilians in Hiroshima and Nagasaki respectively. Afterward, the Japanese civilians were also suffered rape incidents during the occupation of Japan.

Aftermath of Nagasaki atomic bomb at 1945.

What a upset history.