Value averaging
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Value averaging, also known as dollar value averaging (DVA), is a technique of adding to an investment portfolio to provide greater return than similar methods such as dollar cost averaging and random investment. It was developed by former Harvard University professor Michael E. Edleson. With the method, investors contribute to their portfolios in such a way that the portfolio balance increases by a set amount, regardless of market fluctuations. As a result, in periods of market declines, the investor contributes more, while in periods of market climbs, the investor contributes less. Research suggests that the method does indeed result in higher returns at a similar risk, especially for high market variability and long time horizons.
[edit] References
- Marshall, Paul S. (Spring 2000). "A Statistical Comparison of Value Averaging vs. Dollar Cost Averaging and Random Investment Techniques" (PDF). Journal of Financial and Strategic Decisions 13 (1): 87-99. Retrieved on 2006-06-22.
[edit] External links
- Value averaging basics from CNN Money
- Good description of value averaging basics from Sigma Investing
- Value Averaging: The Safe and Easy Strategy for Higher Investment Returns, by Michael E. Edleson. ISBN 0-4700-4977-4
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