Thursday, November 17, 2005

Dollar Cost Averaging

I was investigating an emerging market bond fund tonight and I came across a great article on the Scudder Funds website about Dollar Cost Averaging. If you are new to investing and have heard that dollar cost averaging is advantageous but haven't really gotten your mind around the topic I highly suggest taking a look at this article. They assume no previous experience and present the topic very clearly. Take a look, it is worth it.

Scudder Funds Article on Dollar Cost Averaging

Oh, I'm also very excited about the fund of theirs that I was evaluating. Scudder Emerging Markets Income morningstar snapshot. Their mean return over the past 3 years was 19% annually with a standard deviation of only 9% (if you're not a stats person this article explains why standard deviation is important for investing). Granted a number of other funds in the emerging market bond category beat this one, but I've only got $500 to put into emerging market bonds in my IRA. Compared to the rest of the funds that I can invest in this with those constraings, fund is a superstar. It is even offered transaction free by my brokerage (E*Trade).

1 comment:

Anonymous said...

You should read what Ramit says about bonds at iwillteachyoutoberich.com.

There's some esoteric/statistical academic evidence against cost dollar averaging. http://gsbwww.uchicago.edu/fac/george.constantinides/JFQA_1979.pdf