RE: GGP - Dollar-Cost Averaging14 Sep 2023 19:29
Sorry Midas but I can’t let you get away with this one as you are Implying that just applying your strategy wisely should see investors alright. You are right that if the share price was to go up over a 12 month period and be higher each month, you would still be making profits BUT substantially LESS profits than if you were to invest your £1200 (say) now whilst the SP is 6p than if you split it into £100 segments and bought at the end of each month when the SP increases by 1p per month. I agree that SP’s rarely grow in a linear fashion but you must also agree that there are many posters on here who are expecting the SP to grow to at least 18p in 12 months time from 6p where it has been now.
In this example investing the whole £1,200 now at 6p would purchase 20,000 shares. If you followed your strategy you would buy £100 worth now at 6p = 1,667 shares then next month £100 at 7p = another 1,428 shares, then £100 at 8p = another 1,250 shares and so on until your last monthly purchase of £100 at 17p = a final 588 shares.
Add them all up and your £100 per month purchases on a linear growing SP and you will have amassed 11,561 shares - 43% LESS than the 20,000 shares £1200 would have purchased AND if you were selling up when the SP had reached 18p your £1,200 would have tripled to £3,600 whereas your strategy would see 11,561 shares sold at 18p = £2,081 not even doubling your money.
Now I know you will say that no SP grows by 1p per month to get to the 18p SP from the current 6p but I would argue that we have all seen our GGP SP either grow substantially each month as it did in 2020 OR drop in a fairly linear fashion as it has done ever since - we are now awaiting the Lassonde Curve raise.
So to conclude, as I said before it is inaccurate to promote Dollar (or Pound) Cost Averaging as something that would work if applied correctly - that is misleading as I would contend for GGPers it could be a very costly mistake to follow it - horses for courses as they say!!
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