Details

Value Averaging


Value Averaging

The Safe and Easy Strategy for Higher Investment Returns
Wiley Investment Classics, Band 35 1. Aufl.

von: Michael E. Edleson, William J. Bernstein

16,99 €

Verlag: Wiley
Format: PDF
Veröffentl.: 02.11.2006
ISBN/EAN: 9780470089019
Sprache: englisch
Anzahl Seiten: 256

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Beschreibungen

Michael Edleson first introduced his concept of value averaging to the world in an article written in 1988. He then wrote a book entitled <i>Value Averaging</i> in 1993, which has been nearly impossible to find—until now. With the reintroduction of <i>Value Averaging</i>, you now have access to a strategy that can help you accumulate wealth, increase your investment returns, and achieve your financial goals.
<p>Foreword by <i>William J. Bernstein</i> ix</p> <p>Preface to the 2006 Edition xiii</p> <p>Preface to the 1993 Edition xix</p> <p>Introduction 1</p> <p><b>1 Market Risk, Timing, and Formula Strategies 3</b></p> <p>Risk and Market Returns 3</p> <p>Market Returns over Time 3</p> <p>Distribution of Market Returns 9</p> <p>Risk and Expected Return 13</p> <p>Market Timing and Formula Strategies 20</p> <p>Timing the Market 20</p> <p>Automatic Timing with Formula Strategies 21</p> <p>Endnotes 23</p> <p>2006 Note 24</p> <p><b>2 Dollar Cost Averaging Revisited 25</b></p> <p>Dollar Cost Averaging: An Example 26</p> <p>Short-term Performance 28</p> <p>Over One-Year Periods 30</p> <p>Over Five-Year Periods 32</p> <p>Long-term Problems with Dollar Cost Averaging 34</p> <p>Growth Equalization 35</p> <p>Summary 36</p> <p>Endnotes 37</p> <p><b>3 Value Averaging 39</b></p> <p>Value Averaging: An Introduction 39</p> <p>Short-term Performance 43</p> <p>Long-term Performance and Value Averaging 47</p> <p>Linear, or Fixed-Dollar, Strategies 47</p> <p>Adjusting Strategies for Growth 51</p> <p>Summary 53</p> <p>Endnotes 54</p> <p>2006 Notes 55</p> <p><b>4 Investment Goals with Dollar Cost Averaging 57</b></p> <p>Background 57</p> <p>Lump-Sum Investments 57</p> <p>Using the Formula 59</p> <p>Annuities: Periodic Investments 60</p> <p>Dollar Cost Averaging and Annuities 63</p> <p>Readjusting the Investment Plan 63</p> <p>The Readjustment Process 64</p> <p>Flexibility 66</p> <p>Down-Shifting Investment Risk 69</p> <p>Growth-adjusted Dollar Cost Averaging 71</p> <p>Exact Formula 72</p> <p>Approximate Formula 74</p> <p>Readjusting the DCA Plan 75</p> <p>Summary 80</p> <p>Endnotes 80</p> <p>Appendix to Chapter 4: Constructing a DCA Readjustment Spreadsheet 83</p> <p><b>5 Establishing the Value Path 87</b></p> <p>Value Averaging Value Paths 87</p> <p>The Value Path Formula 88</p> <p>Flexible Variations on the Value Path Formula 89</p> <p>Readjusting the VA Plan 92</p> <p>A Cautionary Note 93</p> <p>An Alternate Method 93</p> <p>Summary 94</p> <p>Endnotes 95</p> <p>Appendix to Chapter 5: Constructing a VA Readjustment Spreadsheet 97</p> <p><b>6 Avoiding Taxes and Transaction Costs 101</b></p> <p>Tax Considerations with Value Averaging 101</p> <p>The Advantage of Deferred Gains 101</p> <p>Deferring Capital Gains Taxes: An Example 102</p> <p>A Compromise: No-Sell Value Averaging 107</p> <p>Reducing Transaction Costs 111</p> <p>Limiting Taxes 111</p> <p>Limiting Costs 112</p> <p>Summary 113</p> <p>Endnotes 114</p> <p><b>7 Playing Simulation Games 117</b></p> <p>Why Simulations? 117</p> <p>What and How? 118</p> <p>Parameters 118</p> <p>Expected Return 119</p> <p>Expected Variability 120</p> <p>Randomness 120</p> <p>Constructing the Simulation 121</p> <p>An Example 122</p> <p>Endnotes 126</p> <p>Appendix to Chapter 7: Constructing a Simulation 129</p> <p>2006 Note 131</p> <p>Endnotes to Appendix to Chapter 7 133</p> <p>2006 Note 134</p> <p><b>8 Comparing the Strategies 135</b></p> <p>Five-year Simulation Results 135</p> <p>Using Growth Adjustments 139</p> <p>No-Sell Variation 142</p> <p>Volatility 143</p> <p>Twenty-year Simulation Results 145</p> <p>Summary 146</p> <p>Endnotes 147</p> <p><b>9 Profiting from Overreaction 149</b></p> <p>Tiring of a Random Walk 149</p> <p>Mean Reversion and Overreaction 150</p> <p>A Brief Look at the Data 151</p> <p>Why Does This Matter? 160</p> <p>Timing 161</p> <p>Endnotes 164</p> <p>2006 Note 167</p> <p><b>10 Details: Getting Started 169</b></p> <p>Using Mutual Funds 169</p> <p>The Fund versus Stock Choice 169</p> <p>Index Funds 171</p> <p>Information on Specific Funds 172</p> <p>Working Out the Details 175</p> <p>Using a Side Fund 176</p> <p>Operating Within a Retirement Account 177</p> <p>Establishing a Value Path 178</p> <p>2006 Note 180</p> <p>Setting Up a VA Value Path: An Example 181</p> <p>Other Important Considerations 184</p> <p>Using Guidelines and Limits 185</p> <p>Notes for Financial Planners 186</p> <p>Advanced Methods 187</p> <p>Summary 189</p> <p>Endnotes 189</p> <p>2006 Note 191</p> <p><b>11 Examples: Strategies at Work 193</b></p> <p>The Goal and Investment Environment 194</p> <p>Choosing an Investment 194</p> <p>Setting the Goal (Dealing with Inflation) 197</p> <p>How Much Should He Invest? 199</p> <p>Investment Return & Taxes 200</p> <p>Expected Return 200</p> <p>Taxes 200</p> <p>Implementing Dollar Cost Averaging 202</p> <p>1981: Setting Up DCA 203</p> <p>1982–1983 Investment Results 205</p> <p>1983: Reassessment and Readjustment 205</p> <p>The 1985 Readjustment 211</p> <p>And So On and So On 212</p> <p>Wrapping It Up: 1991 Results 214</p> <p>Implementing Value Averaging 215</p> <p>Establishing the Value Path 215</p> <p>1983: Readjusting the VA Plan 217</p> <p>Future VA Readjustments 219</p> <p>VA Investments 220</p> <p>Summary 225</p> <p>Key Formulas 226</p> <p>Endnotes 227</p> <p><b>12 A Final Word 229</b></p> <p>Index 231</p>
<p><b>MICHAEL E. EDLESON</b> is a Managing Director of Morgan Stanley and oversees the firm's equity risk globally. Prior to that, he was Chief Economist of NASDAQ and a finance professor at Harvard Business School. Edleson earned his PhD at MIT. <p><b>Includes spreadsheets on a companion Web site: www.wiley.com/go/valueaveraging</b>
<p><b>"Since its first printing in 1991, the cachet of <i>Value Averaging</i> has steadily grown to cult classic status."</b><br> —<i>From the Foreword by William J. Bernstein</i> <p><b>PRAISE FOR VALUE AVERAGING</b> <p>"Dollar cost averaging is making a comeback, and Mike Edleson's value averaging approach is dollar cost averaging on steroids. A must-read for serious investors willing to adhere to the principles found in these pages."<br> <b>—William G. Christie,</b> Frances Hampton Currey Professor of Finance and Professor of Law, Owen Graduate School of Management, Vanderbilt University <p>"Dr. Edleson's book is truly a classic that needs to be perpetuated. I have spent a significant chunk of my career trying to debunk value averaging, but with no success. I'm a believer!"<br> <b>—Paul S. Marshall, PhD,</b> Professor of Finance, Widener University <p><b>FROM THE FIRST EDITION</b> <p>"Today's best way to invest."<br> <b>—<i>Money</i> magazine</b> <p>"Value averaging takes dollar cost averaging one step further. Besides buying low, you sell shares when the markets soar."<br> <b>—<i>The New York Times</i></b> <p>Michael Edleson first introduced his concept of value averaging to the world in an article written in 1988. To satisfy investor interest, he wrote a book entitled <i>Value Averaging</i>, which further detailed this method. Following the publication of the last edition of this highly sought-after book in 1993, it has been nearly impossible to find—until now. With the reintroduction of <i>Value Averaging</i>, you now have access to Edleson's original work on a strategy that can help you accumulate wealth, increase your investment returns, and achieve your financial goals.

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