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The Dollar Cost Averaging Experiment – Let’s Try it Again in 2007

Fear and greed are the largest barrier between any investor and big profits in the stock market. When stocks are rising the fear of missing out (greed) takes over.  When stocks are falling, fear of being the last one on the boat is front and center.  Although, everyone knows the objective is to buy low and sell high – those two emotions lead most to do the opposite.  That’s a fact of trading.  The difference between a successful investor and one who is not is simple.  The successful investor has incorporated a strategy to minimize fear and greed while trading.

There are numerous strategies that one can use.  However, I believe dollar cost averaging is the best one for the average investor.  I have many articles on dollar cost averaging on this site.  I do suggest a slight twist based on where we are in the financial/hard asset cycle.  Read the “The No-Brainer Investment Strategy to Double-Digit Returns” for more details. 

Once again we will document dollar cost averaging into two Exchange Traded Funds (ETFs): Central Exchange Fund of Canada (CEF) – a gold and silver bullion ETF and GDX – a gold stock ETF.  Each month they will be tracked versus the market represented by the S&P 500.  Let’s see if we can nail double digit gains this year.  Here are the results after one month.

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Week in Review 1/26 – Oil Follows Thru

Last Friday’s gain in Oil carried through, as Oil was up nearly 4% for the week.  Interestingly, when Oil traders are in a good mood – it spills over to the other commodities.  For the week Gold, Silver and Copper were up 2.3%, 3.5% and 4.8% respectively.  If Gold can close over $650 this week -  we could be off to the races.  

The general markets struggled with the DOW, S&P 500 and NASDAQ all closing down 0.6% for the week.  It was quite pleasing to see Gold stocks up, while the general markets down.  There is always the fear that as the general market trades down so will the gold stocks.  It is the throw the baby out with the bath water syndrome.  It doesn’t make sense, but it happens.

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Real Money Portfolio – Update 1/28

This thread tracks real trades in one of my portfolios. Refer to backgrounder for more info.  We are back to 100% invested in this portfolio.  Last time this happened was in the beginning of December.  It lasted for a “whole” 3 days.  Making it thru Tuesday, without selling anything, will put a new streak in place.  I am not banking on that happening.  Let’s take a look at what happened last week.

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Week in Review 1/19 – Oil Has a Pulse

What a difference a week makes.  Last week technology was partying like it was 1999.  This week some one took away the punch bowl.  The oldies plus one (Yahoo, Sun Microsystems, Apple, Intel, Dell and Google) were down 5.5% this week.  Apple released great earnings, but its outlook wasn’t overwhelming.  Most were simply looking for an excuse to take profits after an unbelievable start of the year for tech.

On the other hand, the stuff we like to talk about here (commodities) are starting to show some life.  Even oil is trying to get up off the deck.  Although down for the week, it is +3% move on Friday was encouraging.

Let’s review our stocks.

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