Value Averaging: by Michael E. Edleson
Title: Value Averaging: The Safe and Easy Strategy for Higher Investment Returns
Author: Michael E. Edleson
ISBN-10: 0470049774
ISBN-13: 978-0470049778
If you are doing investment, you should be familiar with Dollar Cost Averaging (DCA). It is an systematic investment method to reduce average unit price of your stocks/fund. However, DCA is not perfect, it has some weaknesses. For example, in long term investment, DCA’s return ratio will be reduced due to the inflation.
The Value Averaging: The Safe and Easy Strategy for Higher Investment Returns another investment strategy to overcome the disadvantages of DCA. The author called it Value Averaging. This book explains how value averaging works, include detail calculation how it cover the shortcoming of DCA. Also, it uses historical data from S&P and Nasdaq to compare both dollar cost averaging versus value averaging on return of investment.
This book also teaches how to design your investment plan using spreadsheet software like Ms Excel. You’ll be able to learn from the examples how to use formulas to calculate financial data like annuities for periodic investments, dca and va. There are some examples on how to do the simulations with the investment plans as well.Another interesting part of the book is the author shares how to reduce transaction cost and avoiding taxes.
The last part of the Value Averaging share with the readers on various investment vehicles that are suitable for value averaging. If you are in mutual fund investment, you might want to read it for more detail.
This book brought me a new investment method, value averaging. This is a good investment method to cover what DCA’s shortage. However, value averaging is also not perfect. If you read the book carefully, it is not hard to spot the disadvantages. The book shares about the weaknesses and there are strategies to manage it. There is no perfect system. Like my friend said: there is always another concept behind a concept.
start: 01 Nov 2009
Finish: 03 Nov 2009