Commentary & Insights, Investing

The Big Flaw with Dollar-Cost Averaging Method

Posted at February 15, 2019 » By : » Categories : Commentary & Insights,Investing » 0 Comment

The argument for dollar-cost averaging is you adjust your buy price over time (because of natural price fluctuations) and so you have a better average purchase price.  This means you will make more profits.

But there is a big flaw with this approach: it only talks about buying and not selling.

I heard someone explain dollar-cost averaging this way: Suppose you invest $100 every month.

The first month you buy 10 shares at $10 each
The second month you buy 4 shares at $25 each
The third month buy 2 shares at $50 each

That didn’t make sense to me – I thought you should be selling when the shares were $50 – not buying.

Then I read an amazing book by Robert Lichello on the Automatic Investment Management (AIM). He truly got dollar-cost averaging right because his way involved both buying when prices go down and selling when prices go UP.

The key to generating real profits – not just paper profits – is knowing when to sell and convert your investments to cash. That is the beauty of the AIM system. It is a scientific method to do exactly that.

I was so impressed with Lichello’s AIM system that I wrote two books on AIM with my ideas on how best to use the AIM investing method.

I have been using AIM for over 20 years now and am proof that it works. One Dow Jones portfolio has grown from $15,000 to over $150,000 from 1993 to January 2019. That is up 917% over 25 years including through the dotcom crash and the Great Recession.

Now I publish a monthly newsletter showing the amazing results of using my AIM investing method. Every month I offer tips and insights from other investors using AIM. Often those investors are my clients.

My client J. Hamer recently said,

“Yes, it is cool to look at the spreadsheets and follow the progressions. As always, thanks for what you do. I feel really fortunate to be learning all this from the guru… it really was genius to combine AIM, LEAPS, and your bear strategy as appropriate!”

If you don’t know what LEAPS are, they are long term options. Once you understand AIM, you will be even more excited to see how much better it works with options instead of the stocks they are based on. I can teach you all of this through my website, books, newsletter, or 1-on-1 mentoring.

If you want a complimentary first year of my newsletter subscription (plus a free copy of my first book) send me a message through my contact page here.

Dollar-cost averaging is a good way to buy investments over time but it has no comparison to consistently buying low and selling high. That makes sense doesn’t it? That is the formula for earning high profits over a lifetime and that is what AIM delivers.

 

Disclaimer: Jeffrey Weber is not an investment adviser and gives only his personal view and opinion, never making any investment advice or recommendation to buy or sell specific securities. Investors in financial assets must do so at their own responsibility and with due caution as they involve a significant degree of risk. Before investing in financial assets, investors should do their own research and consult a professional investment adviser.

About Jeff Weber

Jeff Weber is an investor, author, and former US Army auditor. He is on a mission to help as many people as possible buy low, sell high, and earn lifetime profits using the AIM system.

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