Search Results for: ooma

Google Voice Now Available To All In US

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Google Voice announced today that it is now available to everyone in the US, with no need to track down an invite. Here’s a nice, quick intro video for the service for the unfamiliar:

For more tips, see my previous post on how to save money with Google Voice. Did you know you can use it to get free long distance anywhere in the US with your landline? Or, you can give your out-of-state parents a local number they can now call to reach you without paying long distance charges either. GV has expanded their available area codes recently, although many areas are still unavailable for now.

I currently use Google Voice as an additional freelance work number to give out, as opposed to my “one number to rule them all”. I also have it set up to handle my voicemail for my cell phone, in which GV transcribes them and sends it to me as a text message. The overall transcription isn’t the best, but enough to get the general idea and it manages to excel at recognizing phone numbers. I do enjoy the convenience of just reading messages as texts, and being able to listen to messages online while traveling internationally.

Any Gizmo5 experts want to write a guest post on how to build your own VoIP phone service with Google Voice on the cheap? Update: Gizmo5 is closed to new accounts. Lifehacker has a post about using Sipgate to make free calls (a bit clumsily). Since I’m happy with my Ooma, I don’t think I’m willing to put in the research time. 🙂

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


FaxZero Review: Limited, But Still Free Fax Sending

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

In testing out my Ooma, I used the free fax website FaxZero.com to send a fax over to myself. I thought I’d share a quick review.

  • The free service has certain restrictions. You must have it converted to Word/PDF format, up to 2 faxes a day, and a maximum of 3 pages (6 pages total a day).
  • There is an ad on the provided cover page, but thankfully it is just a simple FaxZero ad and not some random company. Here is a scan of what it looks like.
  • You must provide a working e-mail address, as you need to click on a confirmation links sent via e-mail to send your fax. Some users report increased spam, so be careful which e-mail you use.
  • The fax is not sent immediately. It says it might take anywhere from 5-30 minutes depending on how busy they are. It took about 5 minutes for me for my fax to ring.
  • The fax did come through successfully, and the quality was acceptable.
  • You do get a confirmation e-mail with the subject “Your fax to XXX has been sent successfully”.

Overall, I have no complaints about FaxZero since it was a free service that performed as promised. You can also try HelloFax.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Bing Cashback: 20% Off Walmart.com & eBay.com

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

If you’ve been shopping online for a while, you’ve probably heard of cashback shopping “malls” or sites like eBates which offer you a bit of money (or miles or points) back on your purchases made through them. I could have sworn I wrote a post about this already, but anyway, the new kid on the block is Bing Shopping brought to you by Microsoft.

Here’s some of the fine print:

A waiting period (of up to 60 days) and $5 minimum applies to payouts. To earn your cashback, stores will provide us (Microsoft) non-personal info about your purchase, and you will need to provide us with personal information (like your email address above) to create a Bing cashback account. We may use this information to personalize your online experiences, and will treat all your information in keeping with the Microsoft privacy statement. cashback is available only for personal purchases made during your store visit directly from the Bing site. You cannot use coupons or discounts. See Bing cashback terms. Additional store terms may apply.

If you follow the rules, right now you can get some pretty sizeable cashback, including 20% off Walmart.com and 20% off eBay.com purchases*. These stores carry many items that can be hard to find at an additional discount. For example, Walmart sells Apple iPods and eBay sells gift certificates and physical gold.

Always look for an link that looks like this, with the Bing cashback coin:

For example, I just bought an Ooma Hub & Scout from Walmart for $229 minus 20% ($45.80) and also a $25 Walmart gift card, for a net price of about $158. Otherwise, the lowest I could find from various price comparison sites is the price at Amazon of $215, although in some states you may be able to avoid sales tax. After finishing checkout, I immediately received an e-mail saying that I’d get $45.80 after 60 days payable to my PayPal account.

* Visit bing.com/shopping and run a search for “sony”. Look for an ad about cashback from eBay (see above). Click and you should see this image at the top to confirm your 20% cashback:

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Entrepreneur Interview: Lester of BevShots.com

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Even in these tough times, there are still plenty of motivated and passionate people taking risks and starting new businesses. One of these folks is Lester Hutt, who is the founder of BevShots.com, which takes microscopic photos of your favorite drinks and turns them into beautiful art. The piece shown above is English oatmeal stout. I know Lester through a long-time friend, and he agreed to share some of his business experiences as well as how it has affected his family’s personal finances.

What was your inspiration for Bevshots?
I was working as a business research analyst at Florida State University, and my job was to find possible business opportunities out of university research projects and patents. I came across the work of research scientist Michael Davidson, who took photographs under a microscope of a variety of items including DNA, biochemicals, and more. He also did cocktails, which he initially used for a tie collection.

I’ve never really understood abstract art, like a blue wall at a modern art museum that is supposed to express “man’s frustration with industrialization in the 20th century”. I thought that this would be a great opportunity to make a form of modern art that is affordable to the masses.

What previous experience did you find most useful in starting this new business?
For one, my time working for Apple taught me the power of good industrial design and creating a great user experience. In addition, I had just spent the last several years running every aspect of a small business, from product development to managing employees to sales.

How did you come up with the initial funding costs?
We used a combination of loans from family, personal cash reserves, and a revolving line of credit with local community bank. Thanks to my existing banking relationship from the aforementioned small business, it wasn’t difficult to secure a loan with relatively favorable terms.

How did this affect your personal finances?
It definitely affected us quite a bit. For one, we went from two incomes to having only income to support our family. We started looking for places we could cut back, including going out to eat, canceling our cable television, clothes, and travel. We’re also thinking of buying a used car as our next work vehicle.

Besides trimming expenses, we also found that we were unable to take advantage of other investment opportunities like real estate that we might have otherwise pursued. We do still maintain an emergency fund with 8 months of liquid cash. Even in a worst-case scenario for the business, we will still be okay.

More after the jump:

[Read more…]

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


CyberMonday Gifts That Can Pay For Themselves?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

My friends and I were talking about CyberMonday and we started trying to come up with some gift ideas that might pay for themselves, beyond the usual rechargeable batteries or fluorescent light bulbs. Things we’d actually want to receive as gifts, or may end up buying ourselves with the inevitable gift cards. Here’s a few of them:

Emergency Hand-Crank Flashlight and Cell Phone Recharger – Keep one of these in the car, and your cell phone will never die. Just crank and recharge! This one is even solar-powered. Add in the fact that many old cellphones with no monthly plan still have 911 service, and you have another nice emergency back-up. I actually bought one of these – one tip is to make sure you have the right power adapter tips for your phone and keep it handy.

Ooma VoIP Phone System – This VoIP phone system that costs $210 upfront, but you don’t have any ongoing monthly fees for unlimited local and long distance calling in the US. I still haven’t seen one in action, but I keep hearing good reviews though this blog.

Wii Game Console – We were divided on this one (mainly between those who have one and those who don’t…). It can certainly produce less going-out and save money on movies/food/drinks that way, but all the little accessories really add up. Controllers, $50-$80 a pop since they have two parts. Guitar Hero will make you want two guitars. And now comes the Wii Fit! Still, I must admit I love those Raving Rabbids…

Crock Pot / Slow Cooker – Cold weather + recession = Increased slow cooker sales. At least that’s my theory. I saw this at Costco and they were selling fast. The actual crock pot is removable for serving and easy clean-up.

Some previous mentions:

Chest Freezers – Not really much of a gift idea, but still something to consider as food prices are still going up.

Kill-a-Watt Energy Meter – For some reason I bought one of these a year ago, took a bunch of data, and then promptly lost it when we moved. Arrgh. Need to dig this up again.

The Simple Dollar also has some other items in his list of gadgets that actually save money.

Any other ideas?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Magnifying Fear and Joy In The Stock Market

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

A co-worker of mine disclosed today that she moved her entire 401k to cash and bonds last week. She is older than me and has what must be a sizable balance because her reasoning was “I couldn’t stand it anymore, all my contributions for the last year have disappeared! Why did I bother?”

I thought that it was an interesting – albeit dangerous – way of measuring returns. I can see how it can be depressing if you start with $100,000 at the beginning of the year, keep putting away $1,000 every month for a year, and then at the end of year… you still have only $100,000 due to market drops. It can be easy to view it as simply throwing money away. I miss the safety of cash!

But this is dangerous because comparing absolute changes in your entire account to your current contributions would seem to greatly magnify any gains or losses in your account. For example, if you start with $100,000 put in $1,000/month for a year in a bull market, you might end up with $124,000 at the end of the year. You put in $12,000, but your balance grew by $24,000! Feels great, maybe I need more stocks! But in reality this is basically the above scenario in reverse, and nowhere near a 100% return.

This way of framing losses reminded me of the popular behavioral finance book Your Money & Your Brain. Are our brains just wired poorly to deal with the swings of investing?

On the other hand, perhaps this should also serve as a reminder to properly assess your appetite for risk. Going back and forth between lots of stocks and zero stocks is highly unlikely to return in better overall returns. Numerous academic studies have shown that even professional money managers don’t do market timing well at all. Simply picking something in the middle and sticking with it actually turns out better. We can try to use these gloomy times to try and find that balance where we won’t be tempted to go either way in both good times and bad.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Reader Question: Bear Market Worries, What About My Roth IRA?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Earlier this week I got a very good question from a reader:

Last week I decided to take your advice and invest $4,000 in a Roth IRA. My Roth IRA holds only one fund: Vanguard Target Retirement 2050, which holds 90% stocks and 10% bonds. Unfortunately, my timing was terrible: in a mere 3 days, my initial $4,000 investment has already fallen to $3,800, and there seems to be no end in sight. I keep reading all of these pessimistic forecasts about a looming bear market, so I’m very worried about losing my $4,000 investment.

My question for you is: Am I overreacting, or is there something I should do to protect my investment? I don’t need this money now; I invested it knowing fully well that I wouldn’t reap the benefits of it for another 40+ years. If the market keeps going south, however, I’m worried that I’m going to lose most of my $4,000 investment. Do you think I should try to withdraw my remaining money from the Vanguard 2050 fund and invest it in something less risky? I know that you’re generally opposed to attempts to “time” the markets, but I can’t help feeling foolish for investing $4,000 in a fund containing 90% stocks without taking into account the current market conditions.

I think everyone from time to time will question their investments. Again, I’m not a financial professional, but here is what I call “brotherly advice” – as in it’s the same thing I would tell you if you were my family.

1) There is virtually zero chance you will lose your $4,000. That’s part of the benefit of having a widely diversified mutual fund. An individual company, even a huge company like Enron, MCI Worldcom, or E-Trade has the possibility of going bankrupt and becoming worthless. For a Vanguard Target Retirement fund to go to zero, we’d be in Stone Age 2.0 and your primary concerns would probably be food, shelter, and guns.

2) Remember your time horizon. You chose the 2050 fund, which theoretically means you won’t need to withdraw for 43 years, and it seems like you’re okay with that. So then the question is – do you think you will end up higher or lower than $4,000 in 40 years? Because that’s what matters. If you think it will end up higher, then who cares what it’s worth today, or next week, or even the next decade? If you haven’t already, check out this chart.

3) Stop looking at your account. I’m a money geek, but I only look at my IRA accounts once a month to do my net worth updates. Honest! I have zero clue how I’ve done so far this month.

4) Risk = Reward. I know $200 seems like a big loss now, but really it’s just part of the deal. If there was no ups and downs, there would be no extra gain. No risk = bank savings account. You want the ups and downs! Adjusting risk tolerance is a very tricky thing – people tend to have low risk tolerance when the markets go down, and high risk tolerance when the market is hot. Not good. I think the gradual decreasing of risk provided by the Target Retirement fund is a better way to avoid such conflicts.

If 2050 is truly your time horizon, I say stay put. I could go on and on about the behavioral reasons against market timing and pull fancy stats from historical studies, but the above simple reasons are how I convince myself to step back and keep calm. I’ve lost way more than $200 over the last few months, and I haven’t sold a thing. If I do, I’ll let you know. Don’t hold your breath though. 😉

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


401k Lump Sum Contribution: Dollar Cost Averaging Looking Good Right Now

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I’ve been really bad at regularly making contributions to my Self-Employed 401k from Fidelity. I had only planned to put $500 a month into it for the first part of the year, since I wanted to keep as much liquid cash as possible in case I bought a house. Now that it seems like (1) we’ll have enough money both buy a house and contribute to the 401k, (2) we’ve may not buy right away anyhow since we can’t agree on what we want, and (3) the year is quickly coming to an end, I went ahead and sent in a lump sum of $10,000 to catch up!

My problem: The money just showed up on my account today, so I will have to wait until Monday to trade. This is the same day Mr. Bernanke plans on making his Fed Funds rate announcement, which will either calm the market down (drop 0.25%), make it really unhappy (keep it the same), or make it really happy (drop 0.5%). Even with the subprime mess, I am definitely still going invest my money into the stock market… but should I do it all at once?

Usually, in the arena of dollar cost average vs. lump sum my position has been:

If you already have all the money available (not if you’re just taking a set amount out of each paycheck) and you are well away from retirement, you should just invest the lump sum all at once.

This is supported by several studies, including this FPA Journal article Lump Sum Beats Dollar-Cost Averaging, which concludes:

Given a lump sum, is it better to invest the entire amount immediately, or spread it out in equal installments? Based on historical evidence, the major conclusion of our study is that the odds strongly favor investing the lump sum immediately. This conclusion emerges after comparing annualized monthly returns for both DCA and LS strategies for all possible 12-month periods from 1926 to 1991. For the entire 65-year period, the LS strategy produced superior returns approximately two-thirds of the time, and the superior returns were statistically significant.

So it turns out 2/3rds of the time you win out, and 1/3rd of the time you lose. Not bad. The next argument that some people make is DCA is more of a risk-reduction method than anything else. Again, multiple academic articles suggest that DCA may not be a very efficient way to reduce risk, either! Bummer.

Still, given the Bernanke situation, I am considering dollar-cost-averaging $1000 a day over the next two weeks instead of $10,000 all at once on Monday. Prudent idea, or backtracking?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


How Often Should I Rebalance My Investment Portfolio? A Brief Article Review

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I feel like my last post about rebalancing wasn’t as thorough as I’d have liked it to be, so here I go again, adding some quick definitions and including a review of several research articles about the subject.

What is Rebalancing?
Let say you examine your risk tolerance and decide to invest in a mixture of 70% stocks and 30% bonds. As the years go by, your portfolio will drift one way or another. You may drop down to 60% stocks or rise up to 90% stocks. The act of rebalancing involves selling or buying shares in order to return to your initial stock/bond ratio of 70%/30%.

Why Rebalance?
Rebalancing is a way to maintain the risk/reward ratio that you have chosen for your investments. In the example above, doing nothing may leave you with a 90% stock/10% bond portfolio, which is much more aggressive than your initial 70%/30% stock/bond mix.

In addition, rebalancing also forces you to buy temporarily under-performing assets and sell over-performing assets (buy low, sell high). This is the exact opposite behavior of what is shown by many investors, which is to buy in when something is hot and over-performing, only to sell when the same investment becomes out of style (buy high, sell low).

However, in taxable accounts, rebalancing will create capital gains/losses and therefore tax consequences. In some brokerage accounts, rebalancing will incur commission costs or trading fees. This is why, if possible, it is a good idea to redirect any new investment deposits in order to try and maintain your target ratios.

How Often Should I Rebalance My Portfolio?
Some people rebalance on a certain time-based schedule – for example, once every 6-months, every year, or every 2 years. Others wait until certain asset classes shift a certain amount away from their desired targets before taking any action. A good source of research articles about which method is optimal can be found at the AltruistFA Reading Room. I’ve been reading through them the past few days, and I’ll try to provide a very general overview of the articles here.

So what is best? You may be surprised by the fact that not only is there no clear agreement on the answer to this question, but many of the articles actually contradict each other! For instance, compare this Journal of Investing article:

Over this period, regular monthly rebalancing returns dominated less active approaches. Should one infer that daily rebalancing is better still? Our data cannot say, but it seems plausible.

with this excerpt from an Efficient Frontier article:

So, what can we conclude from all this? Monthly rebalancing is too frequent. There are small rewards to increasing one’s rebalancing frequency from quarterly up to several years, but this comes at the price of increased portfolio risk.

Eh? I believe that this is because their results vary significantly with the time period chosen and asset classes being used in their back-tested scenarios.

Then there is this paper from Financial Planning magazine, which used the 25 year period from Oct. 1977-Sept. 2002 and a 60% Stock (S&P 500 Index) and 40% Bond (Lehman Bros. Gov’t Index) as the starting/target allocation. Here are the results for various rebalancing frequencies:

altext

The various rebalancing periods showed minimal performance differences, although annual rebalancing held a slight return margin and a higher risk margin.

Because the risk-adjusted performance differences among the portfolios were small, the answer to the question of when to rebalance–monthly, quarterly, semi-annually, or annually–depends mainly on the costs to the investor of rebalancing.

Efficient Frontier’s Bernstein also agreed in the this last respect, stating “The returns differences among various rebalancing strategies are quite small in the long run.”

In the “wait for a significant shift before taking action” camp is author Larry Swedroe, who I think also presents a very reasonable solution. From a WSJ article:

With major holdings like U.S. stocks, foreign stocks and high-quality U.S. bonds, consider rebalancing whenever your fund holdings get five percentage points above or below your targets, suggests Larry Swedroe, research director at Buckingham Asset Management in St. Louis. For instance, if you have 40% earmarked for bonds, you would rebalance if your bonds got above 45% or fell below 35%.

Meanwhile, for smaller positions in sectors like emerging markets and real-estate investment trusts, Mr. Swedroe recommends a 25% trigger. So if you have 5% targeted for emerging-market stocks, you’d rebalance if emerging markets balloon above 6.25% or fall below 3.75%. “You definitely want to be rebalancing, but you don’t want to be doing it too often,” Mr. Swedroe says. “You want to let stocks go up a bit before you sell, but not so much that you lose control of risk.”

Summary
Since it seems that there is no concrete right answer, I think the most important thing is to just make sure you set up some way to rebalance that does not involve any emotions or market timing. Don’t worry about the details, but don’t let your portfolio run off on its own either. I think the subtitle of one of the articles above sums it up quite well… ‘Tis Better To Have Rebalanced Regularly Than Not At All.

I have personally chosen to rebalance annually. This method keeps it simple while still controlling risk and offering potential extra return. If I recall correctly, it is also recommended in Ferri’s book All About Asset Allocation (review).

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Dollar Cost Averaging: A Poor Way To Reduce Risk?

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Dollar Cost Averaging (DCA) involves investing a fixed amount at a regular interval. Lump-Sum Investing (LSI) involves putting in all the money you have available to invest at once. These are not mutually exclusive! If you are investing a portion of your paycheck every month, you are both Dollar Cost Averaging and Lump Sum Investing. The following is not about such habitual savings.

However, a different situation arises if you have a larger amount of money. Maybe you received an inheritance, an early retirement payout, or you just sold your house. Do you invest the entire amount immediately, or buy a little at a time? Due to the overall upward trend of the markets, lump-sum investing outperforms DCA about 2/3rd of the time. The argument then, is that DCA is a risk-reduction mechanism; You get less performance, but also less exposure to those ups and downs. But is DCA the best way to lower risk?

This question was examined in this academic paper titled Nobody Gains from Dollar Cost Averaging by Knight and Mandell. Here’s a sample of their results. Let’s say you have $100,000 to invest, and you want to achieve a portfolio of 90% stocks (modeled as the S&P 500) and 10% bonds (T-Bills). But that sounds risky to you. You decide to instead invest gradually over 10 years, every month putting a little bit more in, until you finally put $90,000 into stocks.

But what if you instead put everything at once into 50% stocks and 50% bonds, and kept those 50/50 proportions for the entire 10 years instead? That would also reduce your risk. You may be surprised to find out that historically the 50/50 rebalanced portfolio actually had the same amount of volatility than the 90/10 dollar cost averaged portfolio, but with a higher average return (8.37% vs. 8.05%).

So if you are keeping money out of the market because you don’t want to be exposed to a crash, it may simply be better to invest in a less aggressive investment mix. But if you are already regularly investing what you can each month, keep it up! This doesn’t apply to you.

For more academic papers on why DCA is not the best way to reduce risk, see this AltruistFA reading list. Thanks to reader Craig for sending me this article.

For my overall thoughts on investing for beginners, please see my Rough Guide to Investing.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


10 Wacky Ways To Eat Cheap In College

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As a counterpoint to outrageously expensive meals, how about some stupid, unethical, and somewhat scary stories about how I ate on the cheap while in school? Note that I don’t do any of these anymore. (Unless left alone for more than a month, then I regress…)

1. Bringing Ziploc Bags the Dorm Dining Hall. You know you’re not supposed to, but when you’ve just spent all your money on a fancy date, you bend the rules. Our dining hall was pretty much a buffet and I would make entire sandwiches and put them in ziploc bags for later. Cost of lunch: 6 cents for the bag.

2. Crash Random Student Association Meetings. “Why yes, I would like to join the Society of Hypercompetitive Brainwashed Kids (Pre-Med Society)! I too studied for 54 hours straight for that O-Chem midterm. Ummm… the flyer mentioned free pizza?”
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