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So I was goofing around with my own investment records when I realized that I had a great way of showing the advantage of dollar-cost averaging. As you may recall from the mutual fund primer, dollar-cost averaging lets you reduce the variance (to use a poker term) by spreading out your investment over time.

Here’s an example using some real world numbers (Vanguard 500 Index Fund). The following are share prices at the end of every quarter for two years.

Date        Price/Share6/21/2002        $91.22 9/27/2002        $76.37 12/27/2002       $80.73 3/28/2003        $79.69 6/20/2003        $91.94 9/26/2003        $92.08 12/26/2003      $101.15 3/26/2004       $102.30 

From June 2002 - March 2003, the price/share of the fund dropped 12.64%. So if you had taken your maximum $2000 IRA contribution and stuffed into this fund in June and looked at your balance in March, you would have been pissed off.

From June 2003 to March 2004, the fund’s price/share increased 11.27%. If you had put in $2000 in June and looked at your balance in March, you would have been pretty psyched.

Overall, from June 2002 to March 2004, this fund saw its share value go up by +12.15%. Your $4000 investment over two years would be valued at $4468 for a gain of 11.71%.

But what if you had practiced dollar cost averaging? That is, dividing your $2000 in fourths and investing it over the year?

Date        Price/Share        Trans. Amt       Shares6/21/2002        $91.22          $500.00        5.48139/27/2002        $76.37          $500.00        6.547112/27/2002       $80.73          $500.00        6.19353/28/2003        $79.69          $500.00        6.27436/20/2003        $91.94          $500.00        5.43839/26/2003        $92.08          $500.00        5.430112/26/2003      $101.15          $500.00        4.94323/26/2004       $102.30          $500.00        4.8876

From June 2002 to March 2003, you would have seen a drop in the value of your investments of only -2.40% because 1/4 of your shares were purchased at the high price of $91.22, but the other 3/4 were purchased at lower prices (lower prices also translate into more shares).

From June 2003 to March 2004, you would have seen a gain in the value of your investments of only 5.88% because at least half of your shares were purchased at higher prices.

Overall, however, you would have seen a gain of 15.59% on your $4000 investment for a final value of $4,623.47 (remember, the lower prices enabled you to buy more shares during 2002-2003, which translated into more wealth when the fund price topped $100 in 2004).

This demonstrates that dollar-cost averaging not only works to reduce your risk, but in this particular example, allows you to outperform the index itself!

Just got back from the DMV with my new registration card and tags. This is my second trip to the DMV in one week. What a drag.

Back in January or February I got my registration renewal and smog check notice. I also got a ticket for not having a front plate. So I went to the DMV for new plates, went and got the smog check, and sent in my renewal with a check. I guess it never got processed because of the license plate change. I hope whoever designed the DMV’s computer system got his job outsourced to India.

How irritating. Not only did I have to pay a $58 late fee, but now I have to deal with two parking citations for having expired tags, thanks to Culver City ($10) and Los Angeles ($25).

Next time I need to renew my registration, I’m going to do it on the website. There’s a $4 charge, but that’s okay since it buys you peace of mind and less frustration.

Another down week.

CR +$3.95
EM +$1.30
ER +$0.60
JB +$2.45
JC -$5.00
Me -$3.30

Lost quite a bit of money to JB in one hand that I raised blind pre-flop. Three people called, giving him odds to call the raise, and really good odds post-flop for his straight draw, which he made on the turn.

At some point I was almost out and found myself heads up with JC, whom I beat with a straight on the turn. Several hands later we were heads up again and I won. Then he went out in a nice three way pot with CR and JB with the board showing a straight flush draw. River gave JC his king high flush, JB his ace high flush, and CR his 7 high straight flush.

Washington Post: Cheney Dismisses Critic With Obscenity

I suppose Michael Powell and the FCC would count this as news. I wonder if any TV crews caught it on tape?

Check out Glasstrack’s India 2004 blog for updates from Thailand and India. Nothing of interest there yet–except maybe the 4-dollar, 2-hour massages.

I don’t like asking for money, but I think this is important.

In about one month’s time, John Kerry will accept his party’s nomination at the Democratic National Convention. At that point, the Democratic primary will be officially over, and Kerry will not be able to raise any more money.

In about one week’s time, the Kerry campaign will report their fundraising numbers for the second quarter. If Kerry makes it a big one, it will generate more news.

So if you were thinking about contributing, now’s the time to do it.

Contribute now.

Just taking notice of a couple items:

Of all the gruesome stories to come out of Iraq, this one gave me some serious chills–and only because of the shared ethnic background. I tell you, it’s a strange feeling. Having been born and raised in this country, my personality and consciousness is very American, but I guess there are some things that go beyond that.

Washington Post: S. Korean Is Beheaded in Iraq

MultiPoker’s got these twice-daily freeroll tournaments that get about 100-200 registrants, requiring a commitment of only 1-3 hours. Not bad. In fact, it’s possible to play both the 2PM and 5PM tournaments back to back. It’s good practice if you’re a limit grinder like me.

Unlike PokerStars, you don’t have to wait out a couple thousand maniacs who go all in with anything and suck out on your pocket rockets and cowboys; these players are relatively good and are more likely to respect your bets. It’s still a freeroll, however, so even a good player won’t mind risking his stack if he hasn’t invested much time in the game.

Also unlike Pokerstars, the top 20 spots get paid cash, which is a great overlay on the 100 registrant side, and still decent on the 200 side. Top spot gets $30, spots 11-20 get $1.

Yesterday I placed second and won twenty bucks.

Last night we broke out of the rut and opened up the last hour of play to non hold ‘em games. We dusted off Anaconda, Heinz 57, Baseball, Little League, 357, Roll Your Own High Chicago Kings and Low-men, the Jake, and Follow the Queen, and the pots instantly escalated to stack-devastating amounts. I had the second best hand in at least three different games and ended down a few bucks for the night:

Anaconda Hi-Lo: Heads up, Kings full of Jacks going down to Aces full of Fives. Cavebutter raked the whole pot with his low hand also beating mine.

Baseball: Heads up, five Queens going down to five Kings.

Some other game: My hand, second best again to the winning hand. Ugh.

Considering the size of the pots in these games, I think I did reasonably well in the other games, since I could have easily been out my entire buy-in.

There was also an unusual Roll Your Own game where both players at the showdown had five aces, but one had the King for Chicago, resulting in a 25-75 split that caused a little grumbling. It’s easy to forget how Chicago can sometimes make the nuts worth less than half the pot.

After months and months of almost exclusively playing Hold ‘Em, it was hard for players to recognize the strength of hands, and the likelihood of improvement. This, combined with the size of the pots, caused some of the group to fold more quickly than they would have back when we were playing these games more regularly. Probably a good thing. One rule change we might consider is ditching the spread limit and no cap betting we typically have in games with lots of betting like Anaconda and Roll Your Own.