From A Dollar Cost Averaging Stand -point.?

Question

DCAing a 401k. Does it make sense to bail out of large caps rather than ride them to new highs. I was thinking of switching caps at the end of the year. I am 24 and what to accumulate rather than perform well. Am I correct?

Answer 1

I agree with common sense, you should pick a well diversified portfolio and stick with it. Many studies show that when people start switching in and out of investments, they actually make less in the long run because you will end up missing on some of the highest returns, there is no way of knowing then the highest returns will come about, the only way to guarantee them is to stay invested permanently. market timing rarely works in the long run, you need a Crystal ball to be successful, plus this means buying stocks when they are doing badly and selling then they are doing well, and people always want to do the opposite. If you are chasing a hot stock and jumping on the bandwagon, chances are you've already missed the boat.

Answer 2

Usually investing based on different market cap is a new concept which was not prevelent in advanced economies. It sprouted in Emerging economies where there is no homogenity in Business Culture and processes which is not the case with advanced ones. So picking up a good performing stock doesn not usually depend on market cap in advanced economies it is how the management works to produce stock holder's value which is the culture for all companies in advanced economies.
Coming back to your question, it is advisable always to pick up the right stocks depending on your preferences, either growth, dividend paying etc;. Advance economies all companies work to improve the stock holder's value and not just gamble with investor's funds where as in Emerging economies things are not so prudent. One advantage with advanced economies to follow such a plan is that their the companies work on the principle of specilization or differentiation of labor which makes it possible for only people with the right specialization to run and manage companies where as in Emerging economies an investor need to look into lot of things before investing since most of the promoters of companies or management don't have specialization in their respective business. They depend on either others and so cannot fully substantiate stock holder value on a long term basis. So investors use these methods like market caps and sectors and all to find out which is the right one with specialization, whic is not a problem with advanced economies. So in emerging economies the many a company cannot run their missions properly and the investor knowing this try to find out the companies that can and it is the information provided by other investors which appear as market cap in the stock reports. Advanced economies since they work with the right organizational science and theories this is not a problem for the investors. So invest picking up according to your preferences rather than on the tactics employed in emerging economies which may not be required or is redundant there.

Answer 3

The only thing you want in a 401k IS to perform well. you should likely go mid-cap due to your youth but that has nothing to do with DCA. With this election some gold (IAU the etf) likely needed as well. Looking for performance not cap-size. you need growth & must take it where you find it.

Answer 4

You could certainly take some more risk with some small cap funds, but don't bail on what you invested in. The portfolio needs balance and large caps can help you on your way.

Answer 5

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Answer 6

Learn: Asset Allocation.

Avoid: Market timing