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Sunday, 18 February 2018

DCA or Simple Average Down (2)


Read? DCA or Simple Average Down


Doesn't matter DCA or VCA or simple average down.

Don't try it on single stock!

If your single stock price doesn't hit the bottom and does price reversal on up trend; you are going to collect dozens of Panadols to ease your heartache over the next decade or more just to break even. You may still like to call it wrong long-term investing!


14 comments:

  1. This taxi driver is doing DCA and retire at 36.

    --------------------------------------------------

    A taxi driver retires at 33 after amassing 40,000 HSBC shares

    @ http://www.ejinsight.com/20170223-a-taxi-driver-retires-at-33-after-amassing-40000-hsbc-shares/


    Ko Tin-yau
    Feb 23, 2017 1:32pm

    A taxi driver retires at 33 after amassing 40,000 HSBC shares

    Last month a 33-year-old taxi driver posted a statement on social media that he has decided to retire.

    He said that since he started driving a taxi when he was 22, he has been saving up every dollar he could to buy shares in HSBC Holdings (00005.HK).

    After 11 years, he said, he feels he has saved enough and is ready to retire.

    We can learn a lot from his investment experience.

    He has been holding HSBC shares for 11 years, which makes him a typical long-term investor.

    He also has spent a fixed amount on HSBC shares every month regardless of the share price movement, which is the typical dollar cost averaging approach which allows an investor to buy more shares when prices are low and fewer shares when prices are high.

    He started buying HSBC stocks when it was trading at around HK$150 a share. He has pursued his plan even though the stock price plunged at one point to HK$33, sticking to his commitment regardless of the market’s ups and downs.

    As of last month, he was able to accumulate 40,000 shares, with a market value of around HK$2.6 million.

    That means he could receive an annual dividend payment of HK$160,000, based on the bank’s latest full-year dividend payout of 51 US cents.

    Given his simple lifestyle (sleeping, sports and video games are his favorite pastimes), he reckons the dividend income from his HSBC shares will be enough to sustain him for the rest of his life.

    The driver has obviously done quite a few things right. But he is also running a big risk, namely, concentrating his assets in one single investment.

    Imagine had he picked stocks like Esprit Holdings (00330.HK) and Li & Fung (00494.HK), which have suffered huge declines in value and paid much less dividends, he would have to work for much longer to achieve financial freedom, if ever.

    But had he betted on star performers like Tencent Holdings (00700.HK) and started buying since 2006, his portfolio would be worth more than HK$33 million now. That is 12 times more than the HK$2.6 million value of his HSBC shares.

    Stability and diversification are critical for building retirement portfolios. Putting all your eggs in one basket is not a recommended approach.

    The share price of HSBC slumped 5 percent on Tuesday after reporting its latest earnings.

    I wonder if this guy could still sleep soundly at night.

    ReplyDelete
    Replies
    1. .....He started buying HSBC stocks when it was trading at around HK$150 a share. He has pursued his plan even though the stock price plunged at one point to HK$33, sticking to his commitment regardless of the market’s ups and downs.

      Delete
    2. DCA, VCA and average down all work well when stock price hits the bottom and does price reversal on up trend.

      Delete
  2. HKD150 was the top for HSBC back in Oct 2007.

    Last traded at HKD83.55 ... still 44% below the ATH after 10 years!

    Those who simply buy & hold lumpsum in Oct 2007 will be "sibei sianz".

    At least HSBC has quite good dividend payouts ... extra strong panadols LOL!!

    What saved that HK investor (besides panadols) was:
    1. HSBC is a TBTF bank in the global financial system ... (but its relevance has diminished since 2007 ... and obviously china will want their Chinese banks to take greater role)

    2. Never say die ... continue to DCA: -75% during GFC (!!!); -37% drop in 2011; -47% drop from 2013 to 2016 (!!)

    Most people will give up long time ago. He probably concentrated on driving taxi & didn't monitor the stock price! :)

    I think if he intends to depend on this for retirement for the next few decades he better:

    1) learn techniques to protect against the next -30++% downturn;

    2) study other companies / countries / sectors for diversification.

    ReplyDelete
  3. anyone know any trading platform can do DCA? eg. just need to select a counter to buy, amount to invest and interval weekly or monthly? I only know OCBC BCIP but only limited blue chip and in monthly basis.

    ReplyDelete
    Replies
    1. Hi SGXfish,

      There is several available in the market like POSB Invest-Saver, OCBC BCIP and Maybank MIP and even one from POEMS.

      POSB Invest-Saver have limited option and is restricted to only Nikko AM STI ETF and ABF Singapore Index Funds.

      OCBC BCIP charges $5 (if I'm not mistaken) and have several blue chips for you to choose from.

      Maybank MIP on the other hand charges about 1% for amount <$1000 and they provide a very wide range of stocks for you to choose from to perform DCA.

      Intervals are monthly and you may wish to do a google on the few accounts listed above for more details :)

      Delete
  4. There is no mistake about DCA or VCA.

    DCA to poor house if U are wrong or to condo if U are right.

    That's why U can hardly find financial authors recommends AVG. DN. On a stock.

    Average Up may be.

    ReplyDelete
  5. Thanks, Maybank MIP charge a reasonable commission of 0.18%, will call them to check out the custody service charges and whether can I transfer the counter to CDP. I used BCIP to purchase Keppel between $5-7, this method works when price are low.

    ReplyDelete
  6. Most important; stock price must reverse from down trend after hitting bottom

    ReplyDelete
    Replies
    1. That's why financial authors only advise and approve Pyramid Up.

      Is this value average Up.

      Frankly, I have yet to try it because nobody knows when a falling knife has struck bottom.

      FOMO is real.

      I think I have missed 2016 buying on the dip must be i want to try Pyramid Up LOL.

      U see your mindset will determine your action or reaction.

      If 2016 dipped more, I might have been abled to try Pyramid Up lol.

      So is timing the market easy or hard?

      Time in the market is better?

      Delete
  7. i feel more comfortable to do dca at low because the worst case scenario is company close or I stop buying. my weakness is selling, i love to hold. so if i do dca up, when trend turn, i believe i will hold from bull-bear-bull, lol. furthermore, it take a month to execute the selling using this platform.

    ReplyDelete
    Replies
    1. The risk of using DCA on single stock is becoming too over weight.

      Delete

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