Does Dollar Cost Averaging (DCA) Work?

What is DCA?

Dollar cost averaging is an investing technique intended to reduce exposure to risk associated with making a single large purchase. The idea is simple: spend a fixed dollar amount at regular intervals (e.g., monthly) on a particular investment or portfolio/part of a portfolio, regardless of the share price. In this way, more shares are purchased when prices are low and fewer shares are bought when prices are high. The premise of dollar cost averaging is that the investor wants to guard against the market losing value shortly after making his investment. Therefore, he chooses to spread his investment over a number of periods. (From Wikipedia)

According to these two articles they don’t.  Click the links to find out.

MSN Money Mutual Funds: The costly myth of dollar-cost averaging – By Timothy Middleton

Popular wisdom says scheduling your investments is the best way to make money. But it’s actually a sales gimmick to wheedle over time what you won’t commit up front.

USA Today: Dollar-cost averaging’s not all it’s cracked up to be – Investing By John Waggoner

Sometimes, things aren’t as bad as they seem. They’re worse.

You don’t want to crash through the floor when you’re checking for termites. And when the doctor checks out that nagging rash, the four words you don’t want to hear are, “Nurse, evacuate the building.”

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The Stock Market

Today, the Philippine Stock Exchange Index (PSEi) has again dropped by 142.46 points. This was yet another episode in what others say is a global chain shake-up of the world’s stock markets from China, Southeast Asia and New York.

As stock prices fall this may be a good opportunity for investors to do some bargain hunting in the exchange.

I for one has invested a small sum in a food and beverage company in the Philippines today. Its now a wait and see if my gamble or investment has paid off. On a fundamental side the food and beverage industry and the company looks promising this year. There is growth in non-carbonated drinks and expected higher demand for snacks and beverages due to the 2007 elections.

Up until December 2006 I was a puritan conservative investor. All my investments are mostly in insured high yield deposits in banks. Opportunity came last December when the IPO for Philippine National Energy CorporationEnergy Development Corporation (PNOC-EDC) was made available to the general public.

It was my first equity investment. I bought a just 2,000 shares at PHP 3.20 per share which was the minimum for small Filipino investors (the maximum was 7,000 shares). I just sold my shares through an online broker mid-February and made a profit of about 75 percent.

Now I consider myself as more of a moderate conservative investor.

San Miguel wins National Foods takeover

Source: Wikipedia(first posted 11 April 2005 23:05:00, updated 12 April 2005)

After several weeks of bidding against New Zealand‘s Fonterra Co-op, San Miguel Corporation, the largest food company in South East Easia is expected to win in its bid to acquire National Foods of Australia as Fonterra pulled out. In this process, Fonterra has sold its 1/5 share in NatFoods to San Miguel and will profit NZD 268 million.

San Miguel Corporation has recently increased its offer for National Foods AUD 6.40 or about USD 1.46 billion against New Zealand Fonterra’s AUD 6.20.

National Foods Limited

National Foods is one of Australia’s leading dairy products company. It sells fresh, modified and UHT milk under various brands as well as various flavours and brands of yoghurt and cheese. This firm also holds the Australia and New Zealand license for Yoplait yoghurt. According to the firm’s website it has annual revenues in excess of AUD 1.00 billion or about PHP 42 billion.

San Miguel Corporation

San Miguel (Saint Michael in English) Corporation traces its routes in Hispanic Philippines and is known for its San Miguel beer which enjoys a monopoly in the Philippine beer market. It has diversified into related industries such as food processing and is the Philippine licensee of Coca-Cola. It has also invested in packaging and property. The Philippine government owns 41 percent of the food group.

San Miguel is on a buying spree. It has been buying companies all over the Asia Pacific region. It has recently acquired Berri Limited, Australia’s largest juice company. I has bought an Australian brewer, J. Boag & Sons and a Thai brewer, Thai Amarit Brewery.

Fonterra Co-operative Group

Fonterra is probably the world’s largest dairy exporter. It is also probably New Zealand’s first and largest multi-national corporation. Since it is a co-op it is co-owned by about 13,000 New Zealand dairy farmers. According to its website, 95 percent of its production is sold overseas and it has present in 140 countries and territories. In Asia it retails milk under the Anchor, Anlene and Anmum brands. The company claims that it is the same size as Groupe Danone (France), Kraft (USA) and Unilever (Anglo-Dutch) in terms of its annual revenues while Nestlé is the largest dairy company in terms of revenues.

Sources:
San Miguel raises bid for Australia’s National Foods. 07/04/2005. Stuff.co.nz (Fairfax NZ).
Brewer tops Fonterra bid. 07/04/2005. NZ Herald.
Fonterra quits National Foods battle – with $268m booty. 12/04/05. NZ Herald.
San Miguel anticipates National Foods takeover. 11/04/2005. ABC News Online.
San Miguel hikes bid for National Foods. 07/04/2005. INQ7 Money.
San Miguel wins battle. 12/04/2005. BusinessWorld.
“The Boss” Steers San Miguel Expansion. 12/04/05. XtraMSN-Reuters.
SMC wins bid for National Foods as New Zealand rival withdraws. 12/04/2005. Manila Bulletin.