[quote=harvey]
Dollar-cost-averaging is a gimmick invented by investment “advisors” to get you to keep putting money into the market without thinking.[/quote]
Only true in small degree. dollar cost average has mathematical law behind to back it to be a better way for long term investors.
Harmonic mean >= arithmetic mean >= geometric mean
Harmonic Mean = n/(1/a1 + 1/n2 +… + 1/an)
Arithmetic mean = (a1 + a2 + …+ an)/n
Geometric mean = nth root of (a1 x a2 x … x an)
Cost cost average is using harmonic mean, so in the long run produces better return. The volatility actually more benefit harmonic mean. Geometric mean is the effective annualized return for the holding period.
The there means are equal only when a1, a2 …, an are all equal when no volatility in stocks at all.
