Letters to the Editor

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    To the Editors:

    I think there’s a better way to state Robert Muksian’s conclusion on when to invest (“The Best Day of the Year to Invest in the Market,” February 2006 AAII Journal): Invest as soon and as often as money becomes available. Since even monthly low days can’t be known until after the fact, the only strategies he analyzes that can be implemented are to invest fully the first day of each year or to spread that year’s investment out over the first or last days of the months during the year. You’d think that dollar cost averaging over the year would have some benefit, but what’s happening is that investable funds are being kept out of the market, on average, for five months using the first-day-of-month strategy and for nearly six months using the last-day-of-month strategy. Since the average yearly return of the S&P 500 from 1982 through 2004 is around 10.5%, you’d expect both these strategies to underperform the first-day-of-year strategy by around 5%, which is almost exactly what Muksian’s analysis shows. So the best investment strategy, at least for investment in the broad market, seems to be “if you’ve got it, invest it.”

    Hamilton W. Arnold
    Via E-mail

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