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Computerized Investing > July/August 2001

Value Averaging Spreadsheet

| | COMMENTS (3) | A A   Reset

by John Bajkowski

Even a casual observer of the markets understands that the stock market moves both up and down—often in strong, but short bursts. Investors looking to commit funds to the market may be paralyzed with the fear of investing a significant sum of money just prior to a severe market downturn. However, by standing on the sidelines, investors lose out on participating in the long-term superior returns of the stock market. The issue is one of market timing, and no matter what the currently popular market prognosticator says, it is practically impossible to consistently call market tops and bottoms.

Dollar cost averaging and its variations, such as value averaging, offer investors an alternative to the all-or-nothing approach, allowing them to ease into the market over time, which reduces the timing risk. The mechanical aspects of averaging provide an investment discipline, require no market forecasts, and are relatively simple to initiate.

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Sally Laird from MI posted over 5 years ago:

The section of the article on Dollar Cost Averaging is not new material, but the part on Value Averaging was new to me. Thank you for this excellent article.

Michael Paraschos from MI posted over 4 years ago:

Is there a place in this web site (or some other)where I canget the formula for the "internal rate of return calculation"?

Michael Paraschos from MI posted over 4 years ago:

Is there a place in this web site (or some other)where I can get the formula for the "internal rate of return calculation" for the return on a DRIP plan that has periodic investments and dividend reinvested. It would be nice if it was in an Excel spreadsheet.

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