Challenges With Dollar Cost Averaging – ValueWalk Premium
Tom Gayner

Challenges With Dollar Cost Averaging

I got quite a few responses over the last week with regards to questions about what people want to know about dollar cost averaging into low-cost funds.

Q1 hedge fund letters, conference, scoops etc

Tom Gayner

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They revolved around issues on:

  • Which funds / ETFs to pick?
  • Which country to allocate to?
  • Pros & Cons of DIY solutions vs managed solutions

This led me to reflect deeply on the best approach going forward for the series of posts I had intended on dollar cost averaging.

My initial thoughts were to open a Saxo account and share the process with people of a simple DCA strategy. I’ve decided against that for now.

Over the years I have indeed informally advised friends to lean towards dollar cost averaging into index funds in a systematic way.

Almost no one I know has done this.

The reasons often range from execution (forgetting about it) to confusion (not sure what to buy or where, or even setting up brokerage accounts).

Which leads me to conclude that there must be a better way of doing it.

Alternative Solutions

I am deeply sceptical of unit trusts and the associated issues of high fees and mis-selling that seem to happen more frequent than not.

There have been a slew of robo-advisors in recent years that have come onto the scene aimed at tackling many of these problems. For various reasons, I have not felt comfortable recommending them to my friends.

New entrants have come onto the scene recently, with the two I have been following being MoneyOwl and endowus  have addressed some of the issues that I’ve had some misgivings about.

MoneyOwl has received plenty of coverage from the media and bloggers so there’s probably not much value I can add to the discussion around it.

How about endowus?

I’ve actually follow their insights page quite frequently. There’s plenty of high-quality information there and I highly recommend checkking it out. They had a great article that I cite frequently on the tax issues with US ETFs (and my main bugbear with some of the services in the market).

An inconvenient truth – tax on US-listed ETFs.

Still for the most part, I haven’t had any contact with them until recently where I attended a talk by the Chief Investment Officer, Samuel Rhee. I was genuinely impressed and he was very kind in meeting me afterwards where I learned a lot more about their firm and thought process.

One thing which really differentiates endowus from their competitors is the sheer bench of talent they have on their team.

Samuel himself has extensive experience on the investment side of the business with his experience at Morgan Stanley (you can check out his LinkedIn here). It is incredibly rare that you get to speak to someone so senior and it really showed in the depth of his answers.

More importantly, I love the intellecutal rigour of what they are doing, and the advisors that they are able to tap on. They shared a lot of their own research and thinking behind their portfolio selection and its very exciting stuff.

The smell test

When asked how one should pick a business partner, Warren Buffett talked about the need to find people who were hardworking, resourceful and of good character.

One of the main reasons I like to talk to people (even if the aim of technology is to digitize the experience) is to get a good feel of the management team to assess these traits.

So far, it’s been a positive experience and I have picked up and learned a lot from my discussions and questions with them. If I could sum it up, their end goal is to provide evidence based institutional level investments to investors at the lowest cost possible and that really shines through in their work and supporting literature.

But more on that in the future.

Trust but verify

An important thing that I always remind myself and others is that while you can trust people, it is always important to verify whatever they are saying indepdently.

I am going to be digging deeper into the literature that they have provided in the coming weeks and will focus my efforts in coming posts on this area.

Disclosure: I have no vested interest in endowus or the investment solutions on its platform as of writing.

Article by Jun Hao, The Asia Report

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