The most important argument in favor of dollar cost averaging — the only one that matters, in my opinion — is that it reinforces scheduled saving. And since most people get paid on a regular schedule, that makes it convenient too.

Of course, most arguments for and against DCA devolve into specifics around things like strategies or allocations. The specifics typically come with examples that make two questionable assumptions.

The first involves assumptions based on past performance, as it relates to the future. Unfortunately, the future isn’t guaranteed to look anything like the past.

The second is that we’re all rational actors.

Conveniently, Ben Graham tackled this in a paper devoted to new (at the time i.e. 1962) saving plans dedicated to buying stock (pensions plans, CREF, variable annuities, and DCA via mutual fund companies): Continue Reading…

Benjamin Graham spent time throughout the 1940s and 50s lecturing about things he knew nothing about. The speeches came in the disguise of a “Market Outlook.” People wanted to know what would happen next. Graham’s response was typical:

The subject assigned to me for this afternoon is one about which, precisely speaking, I know nothing.

Those were the first words out of his mouth at a lecture given in November of 1952. Then he gave them a history lesson of sorts.

He repeated that in similar fashion in other speeches too. In 1942, inflation worries were the topic du jour heading into WWII. In 1950, people wanted to know how the second half of the century would turn out. In each case, Graham offered some lessons instead.

What follows are a few of those lessons from those three speeches mentioned, mostly without comment. Continue Reading…