💸 Dollar Cost Average? 

Yes. This is the City Chad, your wealth whisperer, unlocking the secrets to abundance in the language of money. Let’s get the show rollin’!

In this week’s edition:

• Markets:🩸Red All Over

• Article: 💸 Dollar Cost Average?

• News: 🚚 UPS Drivers Rolling In It

• Chad of the Week: 🚀 Javier Milei

MARKETS: 🩸 RED ALL OVER

Well it’s been another week of red numbers across the board. Feels a bit like the Red Wedding in Game of Thrones.

Same narratives from previous weeks are playing out. The main focus recently has been how bond yields have been rising. What does this mean for the stock market?

It means that borrowing costs are rising for businesses. So, those not-so-profitable tech companies that focus mainly on growth over profitability are struggling.

On top of that, China keeps spooking everyone with collapsing growth and a real estate debacle.

On the crypto side, things are looking even worse.

We saw Bitcoin plunge 11% in one day. Nobody knows exactly why, but a combination of bad news. Notably, it was reported that Elon Musk’s SpaceX sold all its crypto holdings.

Not the best week for investors by a country mile. But, it’s just the name of the game.

ARTICLE: 💸 DOLLAR COST AVERAGING?

TLDR: If you have not invested yet, shall you go all-in at once in a lump sum or invest money slowly and steadily? Here we take a look at these two strategies to see which one does better. You can then make up your mind of what suits you best. Over time, lump sum investing has proven to be better than dollar cost averaging, but not always.

• The Big Question

• What is dollar cost averaging?

• Lump Sum Investing

• Which one is better?

• The Bottom Line

The Big Question

So let’s say you are new to investing. You have saved a bit of money sitting in the bank paying you pretty much nothing.

Or you just received a windfall inheritance from your aunt Sally who sadly passed away.

You have 6 months living expenses saved and the rest you want to start putting it to work and buy some stocks, just like we discussed before.

Awesome!

Now, shall you put all that money at once or should you buy slowly over a few months or even years?

We will call those two approaches “lump sum” and “dollar cost averaging” (DCA) respectively.

What is dollar cost averaging?

Put simply DCA is when you invest small amounts in an extended period of time regardless of the price.

This way we decrease the risk of paying a particularly high price before a market drop.

By dividing our purchases, we pay an average cost over a period of time. Instead of just one cost at one point in time.

Hence the name “Dollar Cost Average” (duh).

We put our money to work on a regular basis making our investments grow steady in the long run.

This approach can also help you with the mental game, making you develop saving and investing habits.

Lump Sum Investing

The opposite of it would be lump sum investing.

Quite simple again: you basically invest all at once, as soon as possible.

Now the main risk is that you buy at the peak of a market cycle.

Which is normally what people do when they hear about how great the stock market is doing.

Think the dotcom bubble or right before the financial crisis in 2008.

But, the main advantage is that because over the long term markets tend to go up. The sooner you are invested the better (generally).

So when you wait to dollar cost average, you tend to waste precious time out of the markets.

Now that we have the concepts clear, you can choose what benefits you more.

Which one is better?

According to a study by Northwestern Mutual, over the span of 10 years, lump sum investing one million dollars yielded better results than spreading the same amount over 12 months. 

Lump Sum investing did better than DCA about 75% of the time, actually. But that also means that it did worse 25% of the time.

So it’s not a guarantee of better results, just a more likely outcome.

The Bottomline

Lump sum investing does better most of the time but there is no guarantee it will always outperform DCA.

Given the two choices, lump sum investing is statistically better.

DCA does seem to make newbies more comfortable with the psychological element of entering the stock market.

It also creates a discipline to invest regularly, which is what you will want to do after lump sum investing.

You can choose to mix things up, by doing a bit of both. For example, invest say 50% in a lump sum and the rest over a 12 month period. It’s really up to you.

What I can tell you for sure is that both strategies, over the long term, are almost guaranteed to outperform doing nothing.

Don’t let your savings sit under the mattress to be eaten away by inflation.

NEWS: 🚚 UPS DRIVERS ROLLING IN IT

Look at us here. Wanting to make it in the supposedly high prestige and big money world of the office job.

Instead, we could’ve made a killing by delivering parcels.

How is this so?

Well it all started a few weeks ago, when UPS was at a breaking point since a significant chunk of their employees were threatening a major strike.

Happily, after some negotiations, the company and the Teamsters union reached an agreement to enhance the compensation for the employees.

This agreement translates into roughly $170,000 annually, accounting for regular salary as well as benefits.

But there’s a catch. It only really kicks in after 5 years working there.

This news, of course, exploded in social media last month. What has happened since?

Job applications have gone up 50% since the news broke out.

What’s the lesson for you, dear reader?

1. Salaries are determined by supply and demand, and the value created. Not the fanciness of your degree, although having a degree normally translates to higher earning potential.

2. Negotiating power is important. Unionized workforces like those at UPS wield more power than at other delivery companies. So what leverage do you have in your chosen field of work? Can you get more?

3. Less glamorous jobs and businesses can make you money. Remember our article on starting a boring business?

CHAD OF THE WEEK: 🚀 JAVIER MILEI

Many of you might not have heard of Javier Milei. You may even think we’re crazy to make him our CoW. But hear us out.

Javier Milei is an eccentric Argentine economist, former tantric coach and admirer of Donald Trump.

He’s also a real contender to win the general election in Argentina this October 2023.

He has a colorful resume, yes. But to many Argentinians, he’s the last hope for their country to prevent total economic collapse.

Although the mainstream media likes to call him “far-right”, inside Argentina he’s considered a “right libertarian”.

His motto is “life, freedom and property”.

By the way, have you noticed how every political party disliked by The Guardian and their ilk is “far-right”?

Anyway, the fact is that the current economic state of Argentina is frankly deplorable.

Taxes that you can never fully pay, extreme inflation (that has led to looting), many parallel dollar prices and economic protectionism.

And they are not alone in this debacle, unfortunately.

These are some of the symptoms of an illness present in many Latin American countries.

Populist and socialist discourses that lure the masses into voting for a corrupt system that won’t give up its position of power so easily.

Just look at Venezuela, Nicaragua, Bolivia, Brazil... the list goes on.

But things may be about to change in Argentina. A country that at one point amongst the top ten richest countries in the World and today has a poverty rate of almost 40%.

Milei won the PASO election this month. A sort of primary election. And he is promising to change things with an economic shock.

He is now the presidential contender with the most support from the electorate and breaking with the traditional Argentine bipartisanship.

Now he shines like a bright spot in the midst of economic obscurity. A breath of fresh air.

Is he a bit too extreme?

Well, he holds some bizarre views regarding climate change, calling it a socialist lie. He is also an extreme libertarian, arguing people should be able to sell their organs.

Despite that, his diagnostic of Argentinian politics is quite on point.

Coining the term “the caste” referring to the Argentine political class: a corrupt elite that thrives off the state, enacts policies against the population and has not proven itself capable of solving the country’s problems.

With his entry into politics, he promises to destroy it from within.

Is this the guy Argentina needs? Quite likely. Is it the one it deserves? To be seen after October 2023.

Best of luck to you, Argentina.

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