tag:blogger.com,1999:blog-5465015914589377788.post3154840863908929768..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Value Averaging NonsenseMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-5465015914589377788.post-56212763058693397162021-09-11T19:14:10.359-04:002021-09-11T19:14:10.359-04:00As one who has used a slight variation of ...As one who has used a slight variation of robert Lichello's synchrovest over the last three decades i am in agreement with lost cowboy, above. i have not found a better periodic investment system period. don't know why it isn't given more print. the system works best with fluctuating investments, hence i use it for tqqq, soxl, and upro, as well as fast moving growth/momentum solid companies.Anonymoushttps://www.blogger.com/profile/16021721885218832080noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-87045634707091209902013-10-24T06:08:57.180-04:002013-10-24T06:08:57.180-04:00Hi Michael and all commentators
I recently starti...Hi Michael and all commentators<br /><br />I recently starting to research about VA and I'm planning to dig until get convinced how real and valuable is for small investors like us.<br /><br />Before finding your post, I found all these studies:<br />http://valueaveraging.ca/va_research.html<br /><br />- They seem serious studies from different sources<br />- They cover many different scenarios, asset classes, risk, etc. <br />- One of them covers your sample of 2008-2009 (but 2008-2012). This method is not for short-term investments but in 4 years period still was able to beat the other methods (DCA,LumpSum,PropRebalance).<br /><br />I also added similar comment to your other post about this:<br />http://www.michaeljamesonmoney.com/2013/03/value-averaging-experiments.html<br /><br />Michael, thanks for taking some time dedicated to this topic (VA). Your blog is great for all us.<br /><br />Please, if possible, keep covering this topic.<br /><br />Best regards<br />Raul <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-11533849736633977832013-10-07T09:24:09.518-04:002013-10-07T09:24:09.518-04:00@Anonymous: It's not the testing that convinc...@Anonymous: It's not the testing that convinced me -- it was the explanation of where the problem lies. In any case, the onus is on VA proponents to prove that VA works. All of the attempts at justification I've seen are based on bogus IRR calculations.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-34928116963605572722013-10-05T20:04:03.072-04:002013-10-05T20:04:03.072-04:00How do you know that the "others" have t...How do you know that the "others" have tested VA properly. Do it yourself and then form your own judgements.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-91287492618090135132013-06-25T09:28:39.574-04:002013-06-25T09:28:39.574-04:00@Anonymous: That's a pile of nonsense. I was...@Anonymous: That's a pile of nonsense. I was going to test VA claims myself until I read criticisms by others that explained the problems clearly. IRR calculations must be based on when people have money available, not when some investing strategy dictates that money should or should not be available. If you don't think the quote you pulled is true, then I don't think you understand VA.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-90779828220232258172013-06-25T09:21:11.503-04:002013-06-25T09:21:11.503-04:00I have read your post that VA does not work, but y...I have read your post that VA does not work, but you offer no proof that you have tested the concept yourself to show that it does not work. Why don't you provide us with the number crunching that you have done to disprove the theory. In addition you make the comment in the second paragraph above "you have to have a pile of cash on the sidelines available to pour into the market if needed. Either that or you have to borrow deeply if the cash isn’t available". This is false and it shows that you do not have a complete grasp of how you can apply VA.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-28098612158469185902013-04-05T14:02:06.044-04:002013-04-05T14:02:06.044-04:00@Andrew F: This scenario you described sounds qui...@Andrew F: This scenario you described sounds quite dangerous to me. Suppose the retiree started this plan at the beginning of 2008. He bought stocks all the way down until March 2009 when he was at or close to 100% stocks. At this point he lost his nerve completely and sold everything into cash. He suffered a huge loss in only 15 months. Of course, if he had just stayed the course, he'd have been fine eventually, but he chose a 50/50 portfolio for a reason -- he can't handle huge volatility.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32231869995000513822013-04-05T13:32:24.152-04:002013-04-05T13:32:24.152-04:00I see some merit in using VA as a way of maintaini...I see some merit in using VA as a way of maintaining a portfolio in retirement and managing risk.<br /><br />For example, given a starting allocation of 50% stocks, 50% bonds one could use VA with a growth rate of 2% to manage withdrawals from the 'risk' portion of a portfolio (stocks and other volatile assets) with the residual in bonds or cash. I think in this scenario, your concerns about leverage or needing to borrow to invest may not be as founded.Andrew Fhttps://www.blogger.com/profile/09182432042622426328noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-56686071369710933262013-03-25T04:47:29.955-04:002013-03-25T04:47:29.955-04:00@Value Indexer: It would be interesting to try ou...@Value Indexer: It would be interesting to try out these ideas and see how they compare to a portfolio that has the same average asset allocation. A tricky part is to choose a target return for VA with historical returns without taking into account future information. VA tends to look better when you guess the average return for the VA cycle in advance.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-39126567769857403872013-03-25T04:41:16.107-04:002013-03-25T04:41:16.107-04:00@Lost Cowboy: It's true that I didn't inc...@Lost Cowboy: It's true that I didn't include math in my previous post, but that doesn't mean I didn't do any math. I pointed to Hayley's work because I read it and understood it. Your contention that "using simple logic, VA should beat DCA most times when you compare total out of pocket money to total profit" is based on a false comparison. People have money to place in the market when they have it, not when some strategy says they should have it. To have avoided leverage with VA over the last 5 years, an investor would have had to hold back a very large percentage of their portfolio in cash. Not knowing when the next big (or even bigger) crash is coming, should I hold back 50% of my portfolio in cash every time I start a VA cycle? The dismal return on cash has to be factored into VA returns. Either that or factor in borrowing costs and set a leveraging limit, and take into account the fact that just when VA would be most valuable, you can't follow it any more due to the leverage limit. When you do the math to account for these things properly, VA does not beat simpler strategies.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-34235395666953977042013-03-25T04:29:00.727-04:002013-03-25T04:29:00.727-04:00@Potato: I didn't even really use leverage. ...@Potato: I didn't even really use leverage. I normally have dribs and drabs of cash in various trading accounts and I wait until they build up to $3000 to $5000 before investing. During the crash I was more diligent about getting smaller sums into the market. So, I was just a little closer to 100% invested.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-92227224317947008872013-03-25T03:10:20.212-04:002013-03-25T03:10:20.212-04:00Another way to look at it is a constantly-shifting...Another way to look at it is a constantly-shifting asset allocation that occasionally has a large weighting in cash. Like the people who stay out of the market waiting for the prices to be "just right", the costs can be very large because of the low returns on cash. <br /><br />I wonder what the results would be using something other than cash, for example bonds. Their correlation to stocks may be higher than cash but at least they have a higher return as well which might improve the results of the overall portfolio.<br /><br />Other assets (or a mix) could also work to provide the alternative such as real estate and commodities. You could even look at it as doing "value averaging" with all the asset classes, lowering the weighting of one when it starts to go above its target return. I suspect this would look a lot like regular asset allocation, that is if you got all the numbers right to end up with a sensible result (if you target a 1% return on stocks you probably won't get a good result).Value Indexerhttp://valueindexer.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-91612113776210028062013-03-25T01:17:24.286-04:002013-03-25T01:17:24.286-04:00So, I checked your earlier post on VA, you did no ...So, I checked your earlier post on VA, you did no math but based your opinion on somebody's work. How do you know they are right? First, I don't like how M.E. Edleson compared DCA to VA using IRR. Nor do I like the Chart he used, for his comparison. However using simple logic, VA should beat DCA most times when you compare total out of pocket money to total profit. What you should really compare is DCA,VA and Robert Lichello's Synchrovest program from his book superpower investing,1974. Synchrovest is the only periodic investing program I know that keeps track of your average cost per share to determine when to invest extra money in the market.lostcowboyhttps://www.blogger.com/profile/05361293054258573903noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-60051403155392736592013-03-25T00:35:56.912-04:002013-03-25T00:35:56.912-04:00Indeed. At the end of 2008 I thought the crash was...Indeed. At the end of 2008 I thought the crash was a historic opportunity to invest more. I borrowed about a year's worth of expected savings and invested at that point -- adding about 4-5% leverage. I didn't like being leveraged even that much and covered by May 2009. I'm one of the most risk-tolerant investors I personally know, so I can't imagine a lot of people sticking with a plan that calls for 1:1 leverage in the midst of the chaos of a market crash.Potatohttp://www.holypotato.netnoreply@blogger.com