IFB02: Why Timing the Market Wrong Doesn’t Matter that Much

One of the scariest things about investing is buying a stock at the absolute wrong time. Guess what? Timing the market wrong doesn’t matter that much. What is much more important is the time in the market. You read about all the stock market millionaires. Or billionaires. Guess what they all in common? It’s time in the market, not when they purchased the stock. Or at what price. So timing the market wrong really doesn’t matter.
Welcome to the show notes for Investing for Beginners. In today’s session, we answered questions from Braden. A beginning investor from Canada. He had some really great questions for us today. And the focus of the show was on several subjects. First being dollar cost averaging. This is a great investment idea that can help smooth out your returns. And help get you started in the circumstance that you don’t have a lot of money to start with. Fun fact. If you invest in a 401k through work. You already do this!
Next focus item was valuation metrics. These are the numbers that are used to help determine the value of a company. Numbers can be scary for people. But Andrew does a great job of explaining how they work. His ebook helps lay this out. In a very easy to understand way.

* Fees associated with dollar cost averaging and how to minimize them with this strategy


* DIY brokerages moving to free ETF trades and will bigger brokerages offer this as a way to keep their customers


* Explain in more detail the metrics P/E, P/B, P/S, and D/E and what are good standards for these numbers?


* Talk about the importance of putting your money in the market


* Recommendations for options using stocks that pay a dividend but it isn’t enough to buy a full share.
* How to utilize DRIP compounding

I have to say that the quality of questions that we have been receiving is awesome. They have been insightful, thoughtful and probing. Certainly not what you would expect from beginners. They have made us think and delve deep into our answers to help make sure that we cover all aspects of their questions.
So let’s take a look at the Q/A. 
Fees associated with dollar cost averaging. How to mitigate those fees with this strategy?
Andrew: First a few questions for you. What are the commission fees? The fees are lower because I use them through my local bank here in Canada and it is $7 a trade. Braden is looking at an annual rebalance on his retirement account.  As well as maxing out his individual retirement account using the dollar cost averaging strategy.
The reason for these questions is so that I can get a sense of how much money we are talking about. The amount of money that we contribute will have a bearing on how much of percentage the strategy takes out of our investments.
I will start by talking about my eletter portfolio that I follow and I have my readers follow. It is something that I prescribe to and have a big chunk of my life savings in. This puts in $150 a month and I am trying to show that the average person can do it with a small amount and make it great.
I pay $4.95 a trade and with a $150 investment I am losing out on about 2 to 3 percent, which is not ideal because that is a year’s worth of dividend payments. But for something that is such a long-term outlook and a lot of the positions I have recently closed have been gains much higher than 10 to 20 percent so that 3 percent bump doesn’t hurt me that badly. And because I am much younger. I have a longer time horizon so I can see the length of the investment canceling out the ...