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Dollar Cost Averaging: A thank you from your future self

It’s impossible to time the market, so this is the logical next step

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Imagine everyone’s yelling useless advice at you. Now imagine shutting them all up.

That’s dollar cost averaging.

Let us explain.

We all know you can’t time the market. And by that, we mean you can’t know exactly when to buy the lowest low and sell the highest high. It’s been proven again and again and again. There will always be people who try, and every once in a while they’ll get lucky — but those blessed individuals are the exceptions that prove the rule.

So if we know this, what do we do about it? Dollar Cost Averaging. All that means is you spend your spending dollars over a long period of time so that you’re not affected by daily ups and downs of the market. It is the opposite of trying to time the market. You buy when it’s up, you buy when it’s down, you buy when it’s in the middle. And in the end, if the last 100 years of history is any guide, you come out ahead.

Dollar cost averaging is all about having a long-term plan

So when it feels like no one knows anything, remember what we do know: You can’t time the market, so stick with the plan.

#eyes on the prize #investing #stock market

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What does “don’t grab a falling knife” mean?

Financial advisors don’t want you to buy the market before the bottom — but where’s the bottom?

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The jargon’s drifting up from the financial district again.

“Buy the dip”, they’re shouting.

“Don’t grab a falling knife,” they’re hollering.

Who are these people? And what the hell does it mean?

It means they don’t want to buy a plunging stock before it hits the ground. The knife in this metaphor is the stock, and if you grab it in mid-air, you might cut your hand. But if you wait for it to clatter on the kitchen floor, you can safely pick it up by the handle and get back to chopping broccoli.

Don’t grab a falling knife, but when will it stop falling?

Here’s why this isn’t useful advice for the average investor: We don’t know where the floor of this hypothetical kitchen is. When will the knife stop falling? It’s anyone’s guess. Money managers have to avoid the plunging knife because that’s their job. In the words of Rob Carrick: “Professional money managers live in a different world than individual investors. They’re constantly accountable for their work and thus have to be more reactive to market events.”

Those of us looking for long-term returns may be wise to just stick to the plan, buy index funds, and Dollar Cost Average for life. (Aside: When you’re looking for a place to live, ensure the kitchen has a floor. #winning)

Don’t grab a falling knife, but do grab small knives every single day

What we do know is this: If a stock is dropping in value, and if history suggests it will eventually regain that value and then some, it’s a good deal. So if you’re in it for the long haul and have a suitably balanced portfolio, leave the knife talk to the chefs and traders. Buy low, sell high. It’s just common sense.

#jargon #kitchenware #stock market

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Just buy the haystack

Because the haystack is a metaphor for the market

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Jack Bogle became a financial legend not by knowing how to play the market, but by knowing that no one knew how to play the market.

The founder of Vanguard , who died at the age of 89 last year, was called the father of the index fund. The concept was simple: If we know the market is going up, why don’t we just buy the market? Don’t mess around with individual stocks; take the safest route available, preferably with dollar cost averaging, and relax. Or as Bogle put it: “Don’t look for the needle in the haystack. Just buy the haystack.”

“Just buy the haystack” is Jack Bogle’s legacy

The Vanguard Index Fund, introduced in 1976, has generated an 11% average annual return. But the real payoff is how it has transformed the market: It’s estimated that 43% of all stock funds are now index funds. That means nearly half of the market is made up of people who bought the haystack. Isn’t it time to join them?

#haystacks #index funds #investing

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Why Gen Zs crash more cars

The jobs are/were downtown. Downtown housing is too expensive. The obvious solution for Gen Z workers? Live further away. Today’s young workforce is trying to do just that — except, as an Apartment Guide survey reports, they’re getting into accidents on their longer (and longer) commutes. Call it the Gen Z commute. Sure, sure. It’s easy […]

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The jobs are/were downtown. Downtown housing is too expensive. The obvious solution for Gen Z workers? Live further away.

Today’s young workforce is trying to do just that — except, as an Apartment Guide survey reports, they’re getting into accidents on their longer (and longer) commutes.

Call it the Gen Z commute.

Sure, sure. It’s easy to tell people to stop texting and emailing while driving.

But look at the larger problem: People can’t afford housing. They need roommates to stay afloat. They’re pressured to stay hyper-connected to their work. Their cost-of-living budgets (rent, utilities, food) are rising faster than their salaries. They have no choice but to break all three personal finance rules.

Add it all up? And yeah, you’ve got some distracted, addled, stressed-out motorists.

33% of Gen Z workers say they’ve gotten into a car accident while emailing for work. Hear that, bosses? Your Zs need a raise, a rest, and an #OOO reply for two hours a day. Or at the very least, a more generous work from home policy.

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From V-Bucks to Venmo… it’s complicated

For Gen Zs making money and spending it in a digital world, financial literacy needs a major level up

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Remember the old days, when a dollar was a dollar? You could save that crisp, green piece of paper in a bank, grow it in a government savings bond, or cash it in for 100 penny candies.

Times have changed, and so has the dollar. Currency has gone digital. For a generation of digital natives, money is easy to move, and harder than ever to hold onto.

Young Gen Zs convert allowance into Fortnite V-bucks. University students with the stomach for it, trade and buy blockchain-based cryptocurrencies, such as Ethereum, Bitcoin, and any of the 2786 others.

Gen Z’s repay their friends using Venmo and Interac. They buy what they can’t afford using instalment loan credit alternatives, such as Affirm and Afterpay.

This easy, digital flow of money, combined with the rising costs of living, mean that the average Gen Z already carries $14,700 in debt before they’ve secured their first job.

Gen Z will make up 40% of all consumers by 2020, and consumption has never looked more like a bloodsport. Thanks to Facebook, 22% of the average Insta feed is now #ad posts. Experts believe the average American sees between 4000 and 10 000 ads a day.

So, sure, it might be time to get an ad blocker, but the assault on the Wallets of Zs runs deeper still. As is the modern rite of passage, Zs struggle with student debt. It’s more expensive than ever to go to school. The Royal Bank of Canada found tuition at Canadian universities is 2.7 times what it was in 1990. In the US, prices have doubled, or tripled, since the ‘80s.

This all might be manageable if a debt-saddled graduate could find a cheap place to live.

#LOL

The average price of a single-family detached home in Greater Vancouver is more than 10 times what it was in 1980. In Toronto, it now takes 32 years to save enough for a downpayment. San Francisco is notorious. Median rent in that city is $3700/month. Buying a house requires an annual income of at least $172 000 USD.

Generation Z knows what it’s facing. In fact, they’re probably more informed about themselves than any generation that’s come before. Young people are asking for financial literacy in school, but it’s no longer enough to cover the basics in class. For Zs, financial literacy has to become a full time commitment. Because that’s how often their wallets, and their futures, are being targeted.

#Bitcoin #cryptocurrency #Ethereum #Financial Literacy #Fortnite #Generation Z