1 pointThis idea of holding back on buying a car (depreciating asset) in cash and investing it in a lump sum/DCA is too risky. The minute you get into that brand new car, that car depreciates by at least 20% - that's an immediate loss. Further depreciation and along with added interest on top (with interest added to principle) is crazy. Buying cash will only result in the depreciation being the contributor to loss and not interest as well. Let us imagine: buys car cash @ R200k - 20% depreciation = R160k; day 1 year 5 (further depreciation) = R80k value *invest what would have been monthly repayments (excl insurance) using dollar cost averaging @ 4k per month in broad ETF (SWIX40 2012-2017 getting 9% pa (conservative)= 300k total - (240k principle) = 60k growth return on investment = R80k(car value) - R200k(deposit) = -R120k (loss on car) + 60k (DCA INVESTMENT profit) = -60k in assets (car + shares) buy car with 0% deposit at 10% p/a interest (pretty good rate) invest 200k cash in broad ETF (SWIX40); 2012 - 2017 = getting 12.5% pa (pretty good) = R360k total - (200k principle) = 160k growth bank loan amount = -R200k (principle loan) + (-R120k (total interest after 5 years) value of car after 5 years = R80k return on investment = R80k (value of car)- (R200k (principle loan)+R120k (added interest)) = -R240k + 120k (LUMP SUM INVESTMENT profit) = -R120k in assets (car + shares) -R120k (100% loan, invest lump sum) > -R60k (100% deposit, invest monthly repayments. Even with DCA growth) You've lost double the money than with lump sum deposit, even with performance of lump sum investment being good compared to conservative DCA and a good interest rate for car. Also DCA investments were low in comparison to what would've been true monthyl repayments (over 5k) - in other words, interest rates favoured the lump sum investment + 100% finance - imagine if it were the same, not pretty Moral: avoid taking a loan that incurs interest, which would eat away at the performance of other investments. Settle your debts on depreciating items (car, credit card), then invest. There is no balancing of bad debt and investments, really. Kill the bad debt and work on growth from there. NOBODY CAN ASSUME THAT THE PERFORMANCE OF THE MARKET WILL BEAT THE INTEREST RATE THE BANK GIVES YOU - just look at the last 3 years
1 pointI have switched over from prorealtime to mt5 on gt247. Daily analysis will now be done on mt5. Also lookout for mt5 algo tutorials on the algotrading website.
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