What caught my eye this week.
I am running late this week, so I’ll cut straight to the chase and suggest you check out this post on investing a lump sum over at the Of Dollars and Data blog.
Author Nick Maggiulli writes:
The main reason Lump Sum outperforms Dollar Cost Averaging [DCA] is because most markets generally rise over time.
Because of this positive long-term trend, DCA typically buys at higher average prices than Lump Sum.
Additionally, in those rare instances where DCA does outperforms Lump Sum (i.e. in falling markets), it is difficult to stick to DCA.
So the times where DCA has the largest advantage are also the times where it can be the hardest for investors to stick to their plan.
Nick made his bones with animated graphics, but he hasn’t done so many of late.
This post is full of them! The example below shows how the underperformance of dollar-cost averaging increases as the length of the buying period increases.
Our view is that deciding whether to invest a lump sum or put the money in over time is – and should be – an emotional decision, not an intellectual one.
Are you freaked out by the very idea of putting a life-changing amount of money into the market in one go?
Then don’t do it. But do make sure you have a strategy to get the money invested sooner rather than later.
As Nick vividly illustrates, most of the time you’ll pay a high price for leaving cash on the sidelines.
Important note: A long-time reader reports being cold called by an ‘adviser’ claiming to have gotten their telephone number from Monevator. I know nothing about these people and any such calls are not anything to do with this site. Please be careful! My personal rule is NEVER EVER to invest a penny as a result of a cold call. Ever. Unfortunately, people trading off the reputation of others is a growing problem, as Martin Lewis recently went to court to prove.
How did Warren Buffett get rich? – Monevator
From the archive-ator: They don’t tax free time – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1
What price pension freedoms? [Search result] – FT
[Surprisingly] Madoff trustee has recovered 76% of $17.5bn swindled – Reuters
Global dividends hit new record [Search result] – FT
First-time buyer numbers reached a 12-year high in 2018 – Property Reporter
London’s property flippers forced to sell at a loss [Search result] – FT
Africa is a real demographic outlier – Visual Capitalist
Products and services
Royal Mail to donate £60,000 to charity after breaking stamp price rise cap – Guardian
Households spend 10x more toasting bread than charging phones – ThisIsMoney
RateSetter will pay you £100 (and me a bonus) if you invest £1,000 for a year via my affiliate link – RateSetter
[Selective?] data shows rare winning fund returns fall when stars leave – ThisIsMoney
Seeing green: The Foresight UK Infrastructure fund – DIY Investor UK
Beware of a sim card swap scam that can empty your bank account – ThisIsMoney
Homes for sale that come with a perk [Gallery] – Guardian
Comment and opinion
Why do markets go up? – Factor Investor
Fast cars, low returns – Scalable Capital
The case for investing in international bonds – Young FI Guy
Time for Gen X to rally – Money Maven
You wouldn’t wish typical hedge fund returns on anyone – Evidence-based Investor
No-one wants to invest in your shit – Meb Faber
Rental DIY Step 1: Find a tenant – 3652 Days
Rich People’s Problems: I have bonus envy [Search result] – FT
If you love your spouse, FIRE them [Um…] – Financial Samurai
Warren Buffett’s brother from another mother – Abnormal Returns
My financial mistakes – Mrs Young FI Guy
First-mover alpha – A Wealth of Common Sense
What infrastructure has to do with investing – Oddball Stocks
Is HSBC worthy of investment, 10 years after the crisis? – UK Value Investor
Holidays 50% cheaper the week after Brexit, due to uncertainty – ThisIsMoney
Three Tory ministers set to rebel to stop no-deal Brexit [Search result] – FT
What is the practical impact the next day if there’s no-deal? – Guardian
As Britain self-combusts, Ireland is seizing the opportunity – Fortune
Marina Hyde: The country needs Tom Hanks. We get Derek Hatton – Guardian
Kindle book bargains
Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb – £1.99 on Kindle
ReWork: Change the Way You Work Forever by Jason Fried – £1.99 on Kindle
Unscripted: Life, Liberty, and the Pursuit of Entrepreneurship by MJ DeMarco – £0.99 on Kindle
Off our beat
How it feels to win a lifetime’s supply [Of books, milk, KFC…] – Guardian
There’s only one thing to do with today: Seize it – Ryan Holiday
Tim Ferriss interviews Jim Collins [Podcast] – Tim Ferriss
Different kinds of stupid – Morgan Housel
Boy, 12, creates nuclear reaction at home [Note to self: Must try harder] – Guardian
“You do not rise to the level of your goals. You fall to the level of your systems.”
– James Clear, Atomic Habits
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