Matt Brundage

Archive for the 'money' category

Monday, 27 January 2020

Dollar-cost averaging: trying to time the market

Yorktown, VA

Dollar-cost averaging (DCA) is the practice of making regular, equal-value purchases of an investment instrument (usually equities), rather than making a single lump-sum investment as soon as possible. The perceived benefit of DCA is that it enables the investor to buy shares at variable prices throughout the investment period, purchasing more shares when prices are lower, and fewer shares when prices are higher. It’s smart to buy low, right?

The problem with dollar-cost averaging is that it’s another way of trying to time the market — albeit, methodically.

For example, let’s say that you’ve earmarked some money in a savings account and start dollar-cost averaging this money into a broad stock market fund. By doing so, you would be continuously betting that the average share price for the remainder of the DCA investment period will be lower than the current share price if you were to make an immediate lump sum investment. In other words, you’re keeping your money out of the stock market in anticipation that the market will go down.

On a yearly basis, the stock market (namely the S&P 500 index) posts positive calendar year returns about 75% of the time, and negative returns about 25% of the time. So if you happen to dollar-cost average during such a down year, you will indeed come out ahead, as you will have capped your downside. But remember that by employing DCA as an investment strategy, in any given twelve month period, dollar-cost averaging will be a suboptimal strategy about two to three times more often than not.

Every dollar that you leave out of the stock market during a DCA investment period is a dollar guaranteed to earn low returns — languishing in a savings account, U.S. Treasury fund, etc.

This interactive lump-sum vs. DCA calculator demonstrates that lump-sum investing wins over dollar-cost averaging about twice as often.

More thoughts on dollar-cost-averaging from J.L. Collins

Thursday, 19 November 2009

A hip hop translation

I thought that it might be a good linguistic exercise to translate a particularly catchy hip hop track from back in the day. Anyone hazard to guess the song and artists behind it? Here’s a clue to get you started: It was nominated for a Grammy Award. I’ve deliberately excluded lyrical clues such as promotional utterances of record labels and nicknames.

Ferraris and Jaguars are brands of automobiles known to signify certain levels of wealth — or, at the very least, a high marginal propensity to consume. Thus, possession of these types of cars enhances my persona, especially convertibles with their tops down. Driving one of these vehicles recklessly while simultaneously shouting that money is of no substantial consequence helps to bring home the point.

Rolls Royce is another brand of automobile known to signify wealth. They should be driven aggressively while wearing flashy rings. I like the windows slightly open, implying that, unlike the Ferraris and Jaguars in the aforementioned verse, drop top Rolls Royces should be avoided. Again, I shout that money is of no substantial consequence.

I have an aversion to material goods that do not “gleam”, perhaps showing a preference for freshly painted and waxed sheet metal; chrome; gold, silver, and other precious metals; diamonds, and other gems. Price is not taken into consideration when acquiring material goods that gleam. After all, money is of no substantial consequence.

Recent forays into philanthropy consist of contributing financially to friends who are in prison. When my friends come home from prison, new cars are waiting for them. Money is of no substantial consequence to me.

Join us in flaunting our material goods. We travel all around the world, spending our money.

I wear Rolex watches, another outward sign of my material wealth. I contribute financially to my friends’ girlfriends. Perhaps “girlfriend” is too polite a word to use in this context. In any case, the amount of money that I contribute shows how much I love and care for my friends and their significant others. Do not bother praising me for these selfless actions. My income comes from many sources. I paid $100,000 for this bracelet. [Approximately $132,600 in today’s dollars.] Was it foolish of me to have purchased such an expensive piece of jewelry? Consider this: the reflective qualities of said bracelet will cause eye strain. My gun is solid platinum. Even the bullets gleam with gems and/or precious metals. You will die. Unseasoned acquaintances want to join my circle of friends and perhaps benefit from my material wealth. While I am not wholly averse to forming such associations, I prefer that my true friends possess “old money” and that their bank accounts be large. Like mine. My bank account balance is $1,000,000. [Approximately $1,326,200 in today’s dollars.] I have so much money that it fills up the trunk of my car! When I arrive at parties and such, my full trunk of money must look daunting to the average person. This is basic. I have been a free-spender since before the one hundred-dollar bill underwent a major redesign in March 1996. We have a lot of money. Where are the people who have professed hatred toward us?

One of the many benefits of “living the life” is that I get to eat cake that is thicker than the typical middle-class cake. [It’s the pudding.] In addition to eating thick cake, I eat crab while watching women dance in a suggestive manner. I do big things. My music production skills enable obscure music groups to become well-known. I am like a large dog, but instead of wearing a demeaning chain, I have a necklace — and a matching bracelet to boot! My friends admit that I am an important person — the type of person with whom any group of people would like to associate. I’m the type of person who does things that others won’t do, or are incapable of doing. I am so hot that I am hotter than a candle. For the remaining portion of this verse, I will continue to promote myself by using hyperbole. Now I will drop a Barry Manilow reference. Also, I swing every night.

A fellow rapper cannot truly be recognized until:

  1. One million units of his album are shipped to retailers [Unit shipments are what the RIAA uses to determine Gold and Platinum album status.]
  2. He enters into a relationship with a woman who sings r&b
  3. Said r&b woman has all the qualities that one would expect of a typical woman in her situation

Take me, for example. I entered into a relationship with a woman after she first admired my necklace. All of my jewelry is light gray — mostly platinum. Life is like a roll of the dice. Let’s play!

Note to up-and-coming MCs: It doesn’t matter if your albums merely went gold [In the US, this means 500,000 units were shipped to retailers.] or if you wear Rolex watches with diamonds and/or other gems. To get to my level of wealth, you will have to do much more. In fact, take your paycheck and double it. That’s approximately what I make. The trouble lies in the quality of your rapping. I’m a man who likes Mercedes-Benz automobiles with leather, real wood grain, and a frame that is made out of platinum. Honest! I proclaim loudly that money is of no substantial consequence. My teeth gleam from gems that my orthodontist affixed with cement. In addition, both of my wrists gleam from the assorted pieces of jewelry that I wear, including rings, chains, and bracelets. We have it made, so to speak.

Money is of no substantial consequence.

Saturday, 18 October 2008

Mid-month roundup

…This is how I know that I’m a bad blogger: Last week, Annie, her two eldest sisters, and I spent a week out west, conquering the Grand Canyon, Sedona, and the open road, yet I have no blog post to show for it! During our stay, we averaged about 100 photos per day. An unwieldy photo gallery is forthcoming, I promise. And, perhaps, some quality commentary.

…Warren Buffett has given us the green light to start investing again; I’m hopeful that next week will be another solid rebuilding week for the Dow. I’ve sufficiently rationalized my “losses” thus far; I’m truly no longer affected by them. It’s all play money until you have to use it. As I focus the bulk of my investments in retirement accounts, a decreasing percentage of my portfolio hinges on the day-to-day rise and fall of stocks.

…Lately, I’ve been enamored by the work of one J.D. Roth, owner and writer of both Get Rich Slowly and Get Fit Slowly. Every day, I’m in awe at the consistent quality of his work. He’s introduced me to a number of related financial sites. With the wealth of good, free financial information available, it’s a wonder why anyone would choose to hire a financial advisor — unless, of course, one dislikes dealing with his financial situation. As for me, I revel in it. At times, I worry that I worry too much about money. I seriously wouldn’t mind getting randomly audited by the IRS. It would be a pleasant experience for me.

On a related note, sometimes I wish that I had significant consumer debt, only because it would be personally gratifying to pay it off. I’m intrigued by stories of people in debt, and the methods they use to overcome their debt and their bad habits. It would be an incredible feeling of accomplishment to eliminate, say, massive credit card debt. The source of your problems is literally subtracted out of existence.

…I was recently bestowed with a couple of quality “seasoned” laptops that my company had long since abandoned: a four-year-old IBM ThinkPad and a slightly older Dell Inspiron 8100. Both are steps up from my current notebook, a Windows 2000-era Dell that makes a grating grinding sound whenever it’s turned on. Oh, and the touchpad frustratingly registers false clicks at random.

…Some of my coworkers and I have just moved into a swing space, as our office area is being renovated. The problem is that it’s four floors below street level, in a secluded, bomb-proof room with no air flow — conditioned or otherwise. I keep telling myself that at least I’m not working in a uranium mine in Novosibirsk, Russia. I’m entertaining the idea of not shaving or otherwise grooming myself for the duration of our stay in the dungeon, as a quiet protest.

…I’m off to the Maryland Renaissance Festival later today, so I suppose that I will take in a couple of turkey legs and a significant amount of jerky. (Annie cannot resist the jerky vendor.) It will be good to be a part of such a large gathering of geeks. No swords allowed. :-(

Wednesday, 23 July 2008

Found money

Since I can remember, I’ve always been fond of picking up pennies and other coins that I find on the sidewalk, in parking lots, on public floors, etc. That, coupled with the fact that I meticulously record every monetary transaction in Quicken, means that I spend an inordinate amount of time keeping track of this minute source of income.

A recent New Yorker article showed that the act of picking up pennies on the street amounts to little more than minimum wage, if extrapolated over a full hour. Still, there’s a certain enjoyment in it all, even though pennies — and coins in general — are sadly on their way out. When the half-penny was discontinued in 1857, it “had significantly more purchasing power than a dime does today.” (New Yorker) If the Treasury were rational about its coin-minting policies, the penny, nickel, and dime would not be long for this world. The quarter’s days would also be numbered.

It seems as if the only real utility that coins have now is to make change during a purchase. Many people can’t even be inconvenienced to pay with coins anymore. With credit card companies encouraging that small payments be made with cards, the perceived inconvenience of coins has increased.

As for me, I will continue to pick up pennies on the sidewalk as long as the U.S. Mint keeps producing them.


A vindication of sorts.

Tuesday, 3 October 2006

Scheming Republicans

Those scheming Republicans… improving the economy, lowering gas prices, lowering unemployment, smoking out terrorists, keeping the US safe from terrorist attacks — all to selfishly keep control of the House and Senate! I urge you to vote Democrat to reverse these alarming trends.

Wednesday, 20 September 2006

Of falling furniture and crude oil

I read a report recently that conveyed concern over the number of children that are injured or die due to falling TVs and TV stands. Pier 1 has even recalled an item after one Canadian child died after leaning on the open drawer of the TV stand. One child.

Try this lecturing on for size:

… The CPSC also advises keeping your TV as far back as possible on its stand. Make sure the stand itself, whether it’s a bookshelf, dresser or armoire — is stable itself. If possible, anchor it to the wall or floor.

Keep all electrical cords out of a child’s reach. Also, don’t give your kids a reason to climb the furniture.

“Avoid putting on top of TV sets or other pieces of furniture, items that could tempt a child to climb, such as a remote control or a toy,” advises Nord.

I know most of this is just common sense and goes without saying. Perhaps we can use this “crisis” as an opportunity to impart to our children a basic knowledge of classical mechanics. If ten deaths a year is to be considered a crisis, what word can be used to explain the early deaths brought on by nicotine, saturated fats, and the like?

I still don’t give a left-handed flying farkle about crude oil prices. Yes, it’s nice right now to pay relatively lower prices. But will my worrying about it cause prices to fall? Will not worrying about it cause prices to rise?

CNN’s Bill Schneider recently claimed that lower oil prices could be the result of a conspiracy by Big Oil to help Republicans in upcoming midterms. Wha? Yet, just a few months ago, conspiracy theorists claimed that Big Oil colluded to jack up prices at the pump. So, regardless of if prices rise or fall, Big Oil is out to get you.

This lose-lose situation is also found in articles about the economy. On Tuesday, USA Today ran a story called “Gas Price Decline May Spur Inflation“. When prices rise, inflation will occur. When prices fall, inflation will occur. As usual, Newbusters has spot-on analysis of this phenomenon.

What have we learned today? Regardless of the price trend of crude oil, inflation is imminent and Big Oil is conspiring against you. Oh, and your TV wants you dead.

Thursday, 11 May 2006

If I had the power

Here’s a little list I started making last month…

Allow states to lower the drinking age to 18. So, you’re an adult, old enough to appear in “adult” films; old enough to mow down enemy combatants with M1A1 Abrams tanks, but not old enough to bring a glass of pinot noir to your lips?

Institute a flat consumption tax and eliminate the income tax. Granted, this may put my dad out of a job, but hey — how much time/money/stress will this save? A consumption tax should not discriminate against certain products — such as cigarettes or gasoline.

For the sake of free speech, eliminate all campaign finance restrictions. All means all.

Either ban tobacco products completely or revert all restrictive and hypocritical legislation regarding its use, taxation, and advertisement.

Overthrow Roe v. Wade and bring abortion laws back to the states.

Make Social Security contributions and payouts voluntary. Remove all taxes on government benefit payments and capital gains income.

Deport as many illegal aliens as possible. Enforce laws. Strengthen the borders.

Protect citizens from out-of-control judges.

See also: what I believe

Tuesday, 25 April 2006

The cost of staying in shape

Isn’t it great to live in a country where the average person can own a car for the sake of mere convenience? After having moved close to the Forest Glen metro station, I no longer rely on my car, Janus, to take me to the train. Janus now sits quietly at home day after day, while I work. She’s now used for non-essential trips — Pleasure, if you will. I’m literally one block from church. 7/10 of a mile from the hospital and the train station. A mile from the mall and grocery stores. Everything is right here. Yet I’m paying for a car that, essentially, is used to shuttle me back and forth between volleyball and the gym.

The monthly cost of staying in shape:

  • volleyball and gym memberships: $40
  • car payment: $341
  • depreciation: $134
  • insurance: $50
  • fuel: $60
  • misc. car expenses: $20

There. The estimated monthly amount required to keep my body in peak shape: $645. $21 a day?

Monday, 29 August 2005

Left-handed flying farkles

From a narrow, personal-budget perspective, I don’t give a left-handed flying farkle about crude oil prices. Reid put it best the other day about how many of us are whining about nothing:

But right now, [Katrina survivors] need our help. They need your help, and luckily, they need it from the one thing you control.

And what are a lot of us doing? Whining. Yesterday in Atlanta, we had a full-fledged gas scare, complete with price gouging. People waited up to two hours in line to pay $4-$6 per gallon for gas, yet today there are no lines, and gas is below $3.50 per gallon. So people are whining about price gouging.

Look at the reports from New Orleans and Mississippi. If the sole effect Katrina has on you is some time in line to buy pricey gas, how freakin’ lucky are you?

Gas prices don’t matter to me. Why should I worry about them? Is there anything I can do to make them go down? No.

Sunday, 10 July 2005

Just a little bit more

In church today, our priest talked about a survey that was conducted among people earning over $100,000 annually. A question was asked of them: “What do you fear most?” The answer most gave was “Not having enough money to live comfortably.” The follow-up question: “How much is enough?” “Just a little bit more.” Even poor and starving people will not be satisfied with incremental blessings and increases of money/possessions. We all (myself included) want just “a little bit more…”