Averaging

Not sure why this is not in English by default but anyway...

I've been busy with the markets and not on this blog.

I go back to my original assumption that the bailouts for banks was a poor idea; lack of oversight and just funding the bank execs to do "business as usual."

I get this from the horse's mouth; a top person at MPM Chase that admits to not taking less risk but,"If anything we've been taking on more risk now than ever." (since the Govt. funding.)

As for DCA or dollar-cost averaging it's crucial in down times to buy more at cheaper prices, thus reducing the cost basis. IN DCA where you put in a set amount each month you automatically are investing more when the market is low and less when the market is high (In terms of the amount of shares you buy with your dollar.)

FINRA discourages analogies but for the sake of this non-FINRA blog here we go:

If you think of buying a pair of Italian leather boots that are normally $300+ and they go on sale, not because of a defect but because the market is down. Those boots are now at $150 and you bought a pare so now your cost basis on 2 pairs is lower. You know the boots will go up again when the market recovers and you've made money if you sell them on the way up or when they go back to original pricing. If they never go back to $300 you are still saving money in terms of your cost basis (losing less) vs. if you refused to buy another pair until they are $300 again, then they go on sale and you are upset again that you wasted your money. If they never go back to $300 you lose. Hoping those $300 go to $600 is unrealistic, unlikely and speculative vs. if you DCA your boot purchases. Fact is they may never reach $600 but if you bought during the down pricing you would have still made money; buy low, sell high.