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What to know about dollar-cost averaging, an investing strategy to consider during market volatility – CNBC

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

If you’re already contributing money to a 401(k) retirement account, you may not have realized it, but you’re practicing a popular investment strategy known as dollar-cost averaging.

Simply put, this approach means you’re investing fixed, equal amounts on a regular basis, say monthly or bi-weekly, rather than investing one lump sum of cash all at once.

With a defined 401(k) contribution plan, for example, you’re investing as you earn, regularly taking money from each paycheck throughout the year and putting it into the market. Dollar-cost averaging could also look like if you decide to invest $5,000 of your savings by splitting that cash into five parts, where $1,000 is invested each month for five months.

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Here’s what to know about dollar-cost averaging

Dollar-cost averaging allows you to spread out your investments and buy into the market at different times at varying prices. In turn, these purchase prices ideally balance each other out, which is where the “averaging” part of the phrase comes from.

Experts often recommend this long-term investing approach (especially with broad market-tracking index funds) to people with low-risk appetites since contributing cash consistently over time reduces the impact of any market volatility on an investment. Not to mention, it allows investors to forget about the up and down movements of the market since their contributions aren’t influenced by what’s happening; they’re making contributions at regular intervals no matter what. This helps leave emotion-based investing off the table.

Dollar-cost averaging vs. lump-sum investing

Dollar-cost averaging is often compared with its antithesis, lump-sum investing, an opposite approach otherwise known as simply timing the market.

Like dollar-cost averaging, lump-sum investing can also help you build wealth — and even better, maximize your returns — albeit with the caveat that you’re taking on much more risk. After all, as we all know, no one can really time the market.

When investing a big wad of cash into the market all at once, your money gets put to work immediately. With dollar-cost averaging, however, only some of your money goes into the market to start and the rest is set aside for future contributions — this could allow you to catch future dips in the market, but your immediate gains may be smaller if the market takes off sooner than expected.

Is dollar-cost averaging right for you?

When investing with any method or strategy, the first step is to identify the potential returns as well as your risk tolerance.

Though you may get better returns over time with lump-sum investing, it’s not a good idea for those looking to lower their short-term downside risk since the potential for loss is greater.

Risk-averse investors, or those worried about market volatility, are better off using the dollar-cost averaging investment approach. A good place to start is with an S&P 500 index fund which has shown an average annualized return of approximately 10% since 1957.

For example, Charles Schwab’s S&P 500 Index Fund is a straightforward option with no investment minimum. Its expense ratio is 0.02%, meaning every $10,000 invested costs $2 annually — index funds generally have a 0.2% expense ratio, so this is notably low.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

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    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

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    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

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For an option with no expense ratio, consider the Fidelity ZERO® Large Cap Index Fund. Though the fund doesn’t technically track the S&P 500, the Fidelity U.S. Large Cap Index tracks large capitalization stocks, which the website says, “are considered to be stocks of the largest 500 U.S. companies.”

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but minimum $10 balance for robo-advisor to start investing. Minimum $25,000 balance for Fidelity Personalized Planning & Advice

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (after, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity Personalized Planning & Advice has a 0.50% advisory fee

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    Robo-advisor: Fidelity Go® and Fidelity® Personalized Planning & Advice IRA: Fidelity Investments Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®

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    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

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    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

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You can also consider investing a fixed monthly amount through a robo-advisor like Betterment, which will create a custom portfolio of ETFs (which are similar to index funds) for you based on your risk tolerance and investing horizon.

Betterment

On Betterment’s secure site

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance

  • Fees

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee

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    Up to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

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    Stocks, bonds, ETFs and cash

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    Betterment RetireGuide™ helps users plan for retirement

Terms apply.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Despite Bold Investment, Only Gavi Has The Messi Qualities Barcelona Craves – Forbes

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If you minus the squad investment controversy, and the need for Barcelona to reestablish itself as king in Spain and Europe again, there is another dimension to its sizeable summer transfer spending. It’s still trying to plug an 18-year-old gap: Lionel Messi’s time in the Blaugrana first team.

18 years. That’s the age of perhaps its most valuable young player: Gavi. For all the talk of striker Robert Lewandowski, defender Jules Koundé and the other major Camp Nou signings, it’s the young Spanish midfielder set for arguably the defining spell at the club. It should determine whether he and Barcelona come of age.

Going by some indicators, Gavi already has. So far, Barcelona has fended off any interest in him, with Liverpool among the European heavyweights supposed to have eyed the teenager, whose liveliness and trickery have captured many people’s imagination.

Where he wishes to play is still anyone’s guess, with some rumors that a highly anticipated contract renewal depends on whether another player, Manchester City playmaker Bernardo Silva, becomes yet another blockbuster addition. That is despite it not yet registering signings with La Liga. In any case, the idea that Barcelona could make him second fiddle to the Portuguese could be a dealbreaker for the academy graduate. As good as Bernardo is, his employer would do worse than listen to its talent, as his stock at 18 indicates just how precious a player he is, even now.

Barcelona, though, is under pressure. Failure to turn big dollars—also spent on Vegas clásico match-winner Raphinha—into success quickly could see the board flailing around even more next year. While everyone has to pull their weight, if Gavi makes the telling difference from midfield, that will tell us a lot about him and Barcelona moving forward.

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Holding onto him and similarly revered Pedri is more vital than ever. If this spending operation doesn’t work out, it will need to—at least—have its young stars committed to the longer-term project. Sportively and commercially, they could prove trump cards in the future, with their marketability and commercial value likely to boom in the coming years, as Messi’s did.

Keeping these players happy and, crucially, ensuring it can afford to keep them—which finally snapped with Messi—will mean it has two valuable assets down the line. As the Financial Times cited, 19-year-old Pedri is the CIES Football Observatory’s fourth-most valuable player worldwide.

Gavi is not Messi and never will be. Nor will anyone, for that matter. But on previous evidence, Barcelona benefits from players in the Gavi mold—agile, precise passers and tricky to dispossess when on the ball. Barcelona must keep a successful Gavi at all costs, assuming its curious financial operations and La Liga’s vigilance permit it.

That’s especially pertinent when you consider the man nurturing him pitch-side. Xavi perfected the same central midfield role during Barcelona’s golden days, understanding the position inside-out. Despite his lack of experience coaching in Europe, one key benefit to recruiting Xavi was his tactical nous and appreciation of the game—clear to see during his playing days at the team he now manages.

At a juncture when Barcelona is selling more of itself for short-term gain, the diminutive teenager epitomizes what many soccer romantics associate with the Blaugrana at its best—a side with a clear identity thanks to players in the Gavi-Pedri mold. Losing that would be a blow.

By no means has Barcelona deserted its youth during this mammoth spending spree. Ansu Fati, another promising Spaniard, is a cog in Barcelona’s plans and hopes for an injury-free run when the action resumes. Nico González, who accrued more experience last campaign, is another.

But if Barcelona’s business hasn’t finished, it risks impulsivity over sustainability. Barcelona’s seasonal acquisitions are all 25 or over and may be used as quick fixes, replacing a more considered plan. Get the balance right, and everything can click. Albeit a season-opening game, Lewandowski’s seller Bayern Munich is fresh off dismantling Eintracht Frankfurt thanks to a blend of top recruit Sadio Mané and—more so—its nurtured young midfielder Jamal Musiala. That’s the mix Barcelona needs.

For all the hype surrounding the fresh faces, there is no player like Gavi. And there is no closer imitation of Messi than the youngster either. And it’s timely, with a growing clamor for his return in some capacity. In the meantime, Barcelona should focus on recreating the Argentine’s spirit with the crop it already has. That’s not easy to buy.

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Berkshire Hathaway reports operating earnings surge, but posts big investment loss amid market rout – CNBC

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An Andy Warhol-like print of Berkshire Hathaway CEO Warren Buffett hangs outside a clothing stand during the first in-person annual meeting since 2019 of Berkshire Hathaway Inc in Omaha, Nebraska, U.S. April 30, 2022.
Scott Morgan | Reuters

Berkshire Hathaway‘s operating profits jumped in the second quarter despite fears of slowing growth, but Warren Buffett’s conglomerate was not immune to the overall market turmoil.

The conglomerate’s operating earnings — which encompass profits made from the myriad of businesses owned by the conglomerate like insurance, railroads and utilities — totaled $9.283 billion in the second quarter of 2022, Berkshire reported Saturday morning. It marked a 38.8% increase from the same quarter a year ago.

However, the company posted a $53 billion loss on its investments during the quarter. The legendary investor again asked investors to not focus on the quarterly fluctuations in its equity investments.

“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in a statement.

Stocks tumbled into a bear market during the second quarter after aggressive rate hikes from the Federal Reserve to tame soaring inflation sparked fears of a recession. The S&P 500 posted a more than 16% quarterly loss – its biggest one-quarter fall since March 2020. For the first half, the broader market index dropped 20.6% for its largest first-half decline since 1970.

The conglomerate’s Class A stock fell more than 22% in the second quarter, and it’s now down nearly 20% from an all-time high reached March 28. Still, Berkshire’s stock is outperforming the S&P 500 significantly, down 2,5% versus the equity benchmark’s 13% loss year to date.

Berkshire said it spent approximately $1 billion in share repurchases during the second quarter, bringing the six-month total to $4.2 billion. However, that’s a slower repurchase pace than the one seen in the first quarter, when the company bought back $3.2 billion of if its own stock.

The conglomerate showed a massive cash hoard of $105.4 billion at the end of June even though the giant has been more active in deal-making and picking stocks.

The “Oracle of Omaha” has been steadily adding to his Occidental Petroleum stake since March, giving Berkshire a 19.4% Occidental stake worth about $10.9 billion. Occidental has been the best-performing stock in the S&P 500 this year, more than doubling in price on the back of surging oil prices.

In late March, the company said it agreed to buy insurer Alleghany for $11.6 billion — marking Buffett’s biggest deal since 2016.

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How Can We Prevent Another Guo's GTV Investment Scheme? – The Deep Dive

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Almost a year ago, the Securities and Exchange Commission (SEC) issued a cease-and-desist on Steve Bannon and Guo Wengui’s GTV Media Group, along with parent firm Saraca Media Group and Guo’s Voice of Guo Media. The collective has been identified as offering unregistered securities and was able to raise US$487 million from more than 5,000 investors between April 2020 to June 2020.

While all is said and done–the respondents were ordered to pay around US$539.4 million in disgorgement and penalties and has paid around US$455.5 million back so far–one could wonder how this kind of investment scheme slipped through the cracks.

Second-hand retail investment

In April 2020, months before the US general elections, GTV and Saraca launched a stock offering to sell between 20 million and 200 million shares of GTV common stock at US$1.00 per share, representing Saraca’s 10% equity in GTV. In total, the entities were able to sell approximately US$339 million worth of shares to more than 1,000 investors. Based on the company’s promotion about the stock offering, the minimum amount for investing was at US$100,000.

But that was not enough for the companies. The Guo-led media firms also tapped Voice of Guo–giving the latter a one-page Limited Purpose Agency Agreement–to distribute further GTV shares for investors who want to put in investments below the US$100,000-minimum.

“VOG then solicited investors and collected investor funds for the purpose of purchasing shares of GTV stock on their behalf. There was no minimum investment amount to invest in the Stock Offering through VOG and investment amounts were generally in the amount of $100 or more,” read the SEC decision back in September 2021.

The move raised an additional US$114 million from more than 4,500 investors. None of these investors who bought through Voice of Guo were ultimately issued shares.

In both offerings, the majority of the investors were unaccredited.

While pooling funds for an investment is a common practice, one could argue the limits (or the lack thereof) to which retail investment can go–especially through a second-hand agent at that.

Invest-ception

A typical investment is usually based on an investor’s faith in the investee’s corporate governance, including business and investment acumen. While technically not illegal, investing pooled investments in another investment vehicle that will in turn utilize it to hedge its own investment bets is arguably far too removed from control of the original investee.

Shortly after raising the funds from the stock offering, Saraca is said to have transferred US$100 million to a certain “Hedge Fund A for purposes of investing in the fund.” The hedge fund takes positions in various Asian currencies, particularly the Hong Kong dollar–also arguably far from GTV’s media business in which most of the investors were sold to for their investment.

“By late July 2020, Hedge Fund A had invested $30 million of Saraca’s $100 million transfer and, to date, that $30 million investment in Hedge Fund A has lost approximately $29.2 million in value,” the decision read.

A school of thought might describe investment as learned gambling, but having a supposed freehand on utilizing funds that were invested in a specific company operating within a specific industry should at least raise some red flags.

Coins and dollars in one wallet

Completing the US$487 million investment raised by Guo’s media companies is an additional US$34 million collected from its coin offering–giving investors so-called digital assets G-Coins and G-Dollars in exchange. Most of the investors in this coin offering “invested no more than $10,000” each and the companies “never inquired as to the financial or investment background of these investors.”

As part of promoting G-Coin, GTV and Saraca launched promotional materials on its platforms, touting G-Coin’s promise to be merged into G-Dollars that would soon “be usable to purchase goods or services or exchange for gold or fiat currency.” But, apparently, it was all a smoke show.

“As part of its solicitation of G-Coin and G-Dollar investors, the G Entities did not provide investors with financial information about the plan to develop any digital asset or platform, or any written offering materials, including, for example, a white paper or private placement memorandum,” read the decision.

On top of that, investments from the coin offering–effectively tied to a more volatile digital currency–were commingled with proceeds from the stock offering, all pooled in GTV’s bank accounts.

Unregistered yet invested

What could be the most glaring slip up in this investment scheme is the fact that both securities were unregistered. Voice of Guo, which was tasked to offer stocks to investors, is also not registered with the SEC “in any capacity,” let alone a registered broker.

The commission underscored that “no registration statements were filed or in effect for the G Entities’ offers and sales of securities,” in both the stock and coin offering–a clear violation of the Section 5(a) of the Securities Act.

How they were able to offer and successfully sell unregistered securities is still a mystery, and yet not an uncommon conundrum in the investing space. An investor would be smart to avoid any unregistered offerings unsecured by protection laws; if these illegal securities were misrepresented as registered, it could represent a more sinister violation than just failing to register.

If only there was a way to warn investors about unregistered securities being offered to them…


Information for this briefing was found via the SEC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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