Subject: Re: Seth Klarman on CNBC
The second person would have been 28% better off waiting for 14.2 years before investing and starting the DCA process...
Are you seriously telling young people in their wealth-building years to wait 14 years before adding to an index fund? I'm telling my kids (who are in their late 20s and early 30s) to keep adding to their 401Ks every month, allocated 100% to a Vanguard S&P 500 fund. It's the best way for them to accumulate wealth for the long term. I'm telling them not to get cute and try to time the market.
Suppose they had started dollar cost averaging into the Vanguard 500 Index Trust at the worst possible time. Which, as you say, was near the Nasdaq peak at the end of 1999. Here's a table showing how long it took for the dollars invested during the early 2000's to become profitable.
Dollars invested in Became profitable after
=================== =======================
Jan. 2000 6 years and 10 months
Mar. 2001 1 year and 6 months
Sep. 2001 2 years and 1 month
Mar. 2002 1 year and 2 months
June 2002 6 months
I know there are a lot of people who have Post Traumatic Stress Syndrome from the Nasdaq bubble aftermath, but they assume someone put in a big lump sum at the market peak in early 2000 and never invested again. That's just not realistic. What's more realistic is saving money from your paycheck, and investing that amount every month in the market. Put that on autopilot in your company 401K during your working years.
The timeframes in the above table are short for people who have decades to go before they retire. I would never, ever advise young people to wait 14 years before they invest in the market. That's almost half their working career.