Market Timing (Value Investing) vs Dollar Cost Averaging

What's everyones opinion on these two strategies.

I'd prefer to invest in the Buffet style, meaning waiting until the prices are cheap, but who knows how many years you might have to wait. Taking in mind that if you wait 5 years for them to come on sale, the stocks that you are wanting to buy may have doubled by then.

So if you buy in the dollar cost averaging style, you will invest regularly, so won't have to wait 5 or so years to buy, but then you won't be getting as much return on your invested dollars in the stock market, but it will beat 5% in a bank account.

Do you all understand my rambling?

I'd appreciate your thoughts.

Thanks.

Quote:

Originally Posted by ENP

What's everyones opinion on these two strategies.

I'd prefer to invest in the Buffet style, meaning waiting until the prices are cheap, but who knows how many years you might have to wait. Taking in mind that if you wait 5 years for them to come on sale, the stocks that you are wanting to buy may have doubled by then.

So if you buy in the dollar cost averaging style, you will invest regularly, so won't have to wait 5 or so years to buy, but then you won't be getting as much return on your invested dollars in the stock market, but it will beat 5% in a bank account.

Do you all understand my rambling?

I'd appreciate your thoughts.

Thanks.

First of all, stocks do not have to drop to become "cheap", at a more micro level you should focus on the companies outlook for the next 12 months & beyond, then taking into consideration the external macro & economic factors (higher interest rates, FX issues, competition, regulation & general market direction etc)

Following Buffet to the letter, basically requires you to buy $1 worth of assets for 50c, so you may be waiting until a bear market bottoms to find these, why sit out an entire bull market gains, waiting doesnt make much sense does it. People have to realise whilst Buffet has sound fundamentals with his investing style, the economic conditions he had back then may NEVER be repeated.

Dollar cost averaging keeps you in the market across both a bull & bear market, including long period of going sideways within a range - but this method is usually reserved for those long term investors tracking an index or the Snoopy style investor who maintains a balanced portfolio across a range of sectors.

You showed some typical rookie impatience with your purchase of RYM, that in itself would be a great stock to dollar cost average on, retirement villages aren't going to disappear when our baby boomers are rapidly approaching retirement age, & its a well run stable company still in growth mode + a small dividend

What you are really asking is, you are wanting to follow some kind of investment "system" or criteria on to "how to invest".

You first need to work out your risk tolerance, how much available capital you have (& will not need elsewhere for living costs etc)

As a fundamental investor myself (but increasingly looking to TA for timing using candlesticks) i look for "undervalued" companies, mainly ASX resource companies with market caps < $20m, & in particular those with low EV's (thru holding cash or listed investments), especially those with a JORC resource, & options.

Have a look at the following ASX threads for how i saw them as undervalued, SRL, MLM, DGR, GEM, SPQ, GES, GMM, SRZ, FNT, JIN (was MNL)

But ANY company across any sector can be undervalued, it's just a case of finding your area of interest (maybe where you have additional knowledge?)

I try to look ahead & see what companies are set to benefit from the current economic climate, sectors like Uranium, Unconventional Gas, Gold/Silver/PGM's, REE's are among the "hot" sectors right now or will be.

Spend some time going thru the 2011 NZX & ASX comp threads researching some of the companies you like, especially where posters have added comments to back up there selections, costs nothing & some posters well outperform the so called expert brokers!

Lastly, ive found that my own system is a little bit of a few different posters style, i take the best bits of others & combine it with what i know. Its not a fixed thing though & does require constant review & improvement, no one get it right all the time (although Steve Fleming is bloody close!)

ENP.
I have read Buffet books,Benjam Graham [Buffet's teacher] value investing and am sorry to say I cannot find any company that fits their requirements.On your other thread some very experienced people offered you advice,so reread the thread. You have also received sage advice from shasta in the above thread.