The “buy and hope” school of thought is taking its time to die. DCA is the modus operandi of buy and hold and dictates that you buy more of a current holding in dips. This year we have witnessed the spectacle of superstars like Bill Miller chasing Freddie Mac all the way to zero.
The results are horrifying. This fund started the year well over the $10 billion mark.
The amateurs are finding things a little hard to grasp as well:
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This is completely untrue obviously. Simply glancing at a chart for this period makes it clear this is nonsense. This person is in for dissapointment if they are expecting 70% returns over a seven year period under depression conditions.
We wondered what the returns would be like if we had $1000 in the market at the open of 1929 and added another $1000 to it on the open for a decade.
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The nominal return is higher than what we would have expected – an 11.34% return over the decade compared to keeping it under the mattress. The most interesting part of the numbers is the wild volatility over the entire period. Committing to the short side or the long side wouldn’t have helped you much over this decade. You needed to be a trader.
