February 9, 2025 • 24 mins
Suze explains what Value Cost Averaging investing is and how it’s different from Dollar Cost Averaging and Lump Sum investing. Could Value Cost Averaging be the right way for you to invest? Get out your Suze notebooks and find out!
(Note: this has been updated from the version released earlier)
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Suze (00:28):
February 9, 2025. Welcome everybody to the Women and Money
podcast and everybody smart enough to listen. Today is...
KT (00:37):
Super Bowl Sunday!
Suze (00:39):
And Suze School with KT KT, it's Super Bowl.
KT (00:45):
Who's gonna wait, who's gonna win?
Suze (00:47):
Wait, how long
have Colo and I waited for this day.
KT (00:52):
They... since last Super Bowl. They both love football so much
and it's like Colo's #2 sport. His number one is
really soccer, you know, which is European football, but he
loves this with Suze more than life itself, and they
both laugh because I'm a very newcomer to the sport
(01:13):
of American football.
Suze (01:14):
Yeah, 20 some odd years, KT, you have to get
that you have been watching football Super Bowls with me
for over 20 years, so don't, don't go blaming it
on that you're a newcomer when it's 20 years old.
KT (01:30):
I still am a newcomer.
Suze (01:31):
No, you're somebody who just like with a Roth IRA,
you refuse to get it.
KT (01:37):
No, it's not true.
What isn't true?
Suze (01:40):
I never grew up with football ever, so you're the
only person that I ever experienced football with.
For 20 some odd years now 24 years.
KT (01:50):
Ok, so 20 Super Bowls, that's not a big deal.
OK, let's continue. Chiefs are gonna win, everybody.
Suze (01:58):
So did you all like my little Suze thing that
I put out yesterday, everybody, you know, that little character
I that...
KT (02:06):
Yeah, her little emoji.
Suze (02:08):
My emoji. Do you like...
KT (02:09):
Her football emoji.
Suze (02:11):
I love it. That was so sweet. Oh my God, I loved it,
KT (02:15):
She tried to do one of me, but it didn't work.
Suze (02:19):
And everybody, do you know why it didn't work?
KT (02:21):
I didn't like the way my hair looked.
Suze (02:23):
On an emoji. Can you imagine?
KT (02:25):
I said, Suze, that looks like my face, but my
hair doesn't look like that.
She had this funny like hairstyle and it was gray.
I said, I have white hair. I have silver white hair.
I don't have gray hair. It's, it never went gray.
It just went from...
Suze (02:39):
Can you believe this everybody went from an emoji. Wait, KT,
tell them about the little ad we did the other
day for the, so everybody, the Ultimate Retirement Guide
For 50+ is finally coming out in paperback on February 18th,
so Barnes and Noble, la da da, they all requested,
(03:00):
would I just do a little blurb on it, you know,
just tell everybody about it, tell them what I did, KT.
KT (03:06):
She's in bed. She just, um, woke up and she said, KT,
can you take a video of me? And I said,
doing what?
And she had on her bathrobe and she said just
take a just put the camera on. So I turned
it on and she did this whole thirty second commercial in bed
in her pajamas with her book...
Suze (03:26):
In my robe.
KT (03:26):
In her robe. It's hysterical.
Suze (03:29):
I don't wear pajams.
KT (03:30):
She does. She wears a night shirt.
Suze (03:31):
Not often.
KT (03:33):
You wear a night shirt. You love your night shirt.
I know you love it. All right, so, so wait,
let's go back to the Chiefs versus the Eagles. I
want the Chiefs to win because I want to see
history take place. Repeat.
Suze (03:50):
It would be a three-peat. That's what it's called it
3 times he's done it.
KT (03:55):
Three-peat?
Instead of it sounds like a repeat, but no one's
done this.
Suze (04:00):
Three, three times.
KT (04:02):
Three consecutives.
Suze (04:05):
It's called a three-peat. Pat Riley owns the trademark on
that word, by the way.
KT (04:09):
Does he?
Suze (04:09):
I think so.
One day you'll have to tell when Pat Riley called,
but that's besides the point.
KT (04:14):
I didn't know who that guy was either.
Suze (04:18):
Anyway.
KT (04:19):
So Super Bowl Sunday today, I can't wait and my
biggest excitement is I get to watch the commercials, which
is what I love around Super Bowl.
Suze (04:29):
OK, today is Suze School, however, KT and this is
where I think it's important.
That people know the difference truly dollar wise between three
different ways to invest. One is lump sum investing. One
(04:50):
is dollar cost averaging, which I've been talking about for years,
and the third is value cost averaging. So are you
ready
to get out your Suze notebooks, you need to write
this down for the Suze school. OK, so now listen
KT now just wait, don't say anything. I can see
(05:12):
you want to say something. Don't say anything. I'm going
to give a detailed example now.
Where I am actually going to use numbers and compare
lump sum investing with dollar cost averaging with value cost averaging.
KT (05:29):
OK.
Suze (05:29):
All right, so let's just say.
You had an inheritance. You got a bonus. I don't
know what happened, but all of a sudden you have
$12,000 that you want to put into the market. Now
whether it's an individual stock, an exchange traded fund, it
does not matter, but let's just say you want to
(05:51):
invest $12,000 in an ETF an exchange traded fund. Let's
just say that's true for right now.
And the ETF or the stock, whatever it may be,
is trading at $120 per share.
For lump sum investing, you simply take the entire lump
(06:13):
sum of $12,000. January 1st of let's just say 2024,
and what do you do? You buy 100 shares of
this stock or ETF.
And therefore you're done for the year you bought it
you don't do anything else and during the year it
(06:36):
goes up a little, it goes down maybe a lot
up it's all over the place, but at the end
of the year it's back to $120 a share.
That means at the end of the year after 12
months your investment is still worth $12,000 and you're kind
(06:58):
of happy because at least you're not down even though
you're not up you haven't lost anything.
Dollar cost averaging.
This is where you take the amount of money, the
$12,000 that you want to commit for this year.
But rather than investing it all at once, you divide
(07:20):
the amount you want to invest for the year by 12.
12 months. So what that means in this case is
you divide $12,000 by 12, and you now know you
are going to invest $1000 of fixed $1000 every single month.
(07:44):
For one full year.
And let's say you start to do that. The very
first month, you're going to invest $1000 and this stock
or ETF is at $120 a share.
That allows you to buy 8.33 shares. Just simply divide
(08:09):
$1000 by the price of the share. This case $120
and that gives you the number of shares you can
buy in month two. It's at $100 per share.
You now are investing $1000 so $1000 divided by 100
is $10 so that allows you to buy 10 shares.
(08:32):
Now it goes down to $90 per share.
So you can buy 11.1 shares with your $1000 the
third month. The fourth month it goes back up to
$100 per share, allowing you to buy 10 shares for
your $1000 investment. Month 5, it stays at $100 per share.
(09:00):
Again, allowing you to buy 10 shares and just for
ease here, let's just say month 6 through 12, it
goes up big, it goes up 20%, it goes up
to $120 a share again.
So each month you get to for your $1000 per month,
(09:22):
you get to buy 8.33 shares.
So at the end of all this, you have approximately
107.74 shares at the ending value of $120 a share.
So now you have $12,928.20. Now this is a gain
(09:48):
compared to lump sum investing, which is why over all
these years.
I've been telling you all to do dollar cost averaging.
However
Value cost averaging is something that I have been trying
to figure out. Keith Fitzgerald absolutely loves it. He's been
(10:13):
able to automate it just so you know. However, it's
something that I really had a hard time figuring out,
so I sat down and I really put my mind
to it and I finally get it. Now even though
in this particular situation.
You're going to see it's not a lot of difference,
(10:36):
but remember the goal this year is to make your
money make more money, but any amount of money that's
more than something else is more money. So just listen
closely now. With value cost averaging instead of investing a
fixed amount each month.
(10:58):
Like we just did $1000 a month with dollar cost averaging.
You adjust your investment to maintain a target portfolio value.
As if you had invested $1000 per month.
So you want your portfolio value every single month.
(11:25):
To go from 1000 to 2000 to $3000 all the
way up to where you had essentially invested $12,000 but
you want that to be the portfolio value every single time,
all right.
So are you ready now? Month one...
(11:47):
the stock or ETF is at $120 so these are
the exact same share prices as dollar cost averaging, right?
Month one, the stock or ETF is valued at $120
a share.
And you want your target portfolio value to be $1000
(12:10):
so you are going to invest $1000 and you're gonna
be able to buy 8.33 shares, but now month two.
It drops to $100 so your portfolio value though is
only worth at this moment in time $833. That's because
(12:35):
in month one you got to buy 8.33 shares. Now
when you're getting ready to invest again, the stock or
ETF is only worth $100 so your portfolio is worth
only $833.
But this is your second month and you have a
portfolio value target of $2000. So to reach the $2000 target.
(13:03):
You have to subtract $833 from the $2000 portfolio value target,
and that means you are short by $1,166.67 so you
now have to buy 11.67 shares.
(13:25):
Of the stock or ETF, did that make sense to you?
In the first case of dollar cost averaging, you always
are investing a fixed $1000. Here you are changing the
amount that you are investing every month so that you
can meet your target portfolio value which is going to
(13:49):
go up by $1000 a month.
Month 3.
Now the stock drops to $90 but now remember you
have a total of 20 shares at this point.
And therefore at $90 a share your portfolio value is
(14:09):
only worth $1800 but this is the 3rd month so
you're supposed to have $3000 so now you're going to
have to invest $1200.
Or 13.33 shares to bring the entire value up to $3000.
(14:32):
So now you have a total of 33.33 shares. Are
you getting this, everybody? I'll do a few more. Month four,
the stock now, let's just say goes back to $100.
And because you have 33.33 shares, your portfolio value is $3,333.33.
(14:54):
But this is month 4 and you're supposed to have $4000.
So if you subtract $3,333 essentially from $4000 you have
to invest $667 approximately so that you can buy 6.67 shares,
but now you have a total of 40 shares, but again.
(15:18):
40 shares is going to give you $4000 of an
investment portfolio value because it's worth $100 a share. Month 5,
it remains at $100 a share. So now though because
it's month 5 and you need to have $5000 of
(15:40):
a portfolio value, you're now going to buy 10 shares.
All right, you have a total of 50 shares, but
now month 6 through 12.
We're just going to say that the stock rises to
$120 a share.
And it's gonna stay there for all 7 months, so
(16:05):
you are going to have to invest essentially $1000 a
month for the next 7 months to keep your portfolio
value at where it should be just that simple.
Now by the end of the year you are going
(16:25):
to own 108.31 shares at $120 a share.
Is $12,997 at the final price.
Now pay attention here closely. The lump sum.
(16:46):
At 100 shares at $120 a share, you only have $12,000.
Dollar cost averaging.
You have 107.74 shares at $120 a share. You now
have $12,928.80 in your portfolio.
(17:09):
Value cost averaging even after all that work.
You have 108.31 shares at $120 a share. You now
have $12,997.20.
Lump sum...
Value cost averaging your $997.20 a head.
(17:34):
But compared to dollar cost averaging, you're only $68.40 ahead. Now,
While that's only a little bit of gain, as I
said previously, what you really have to understand is these
were just numbers that I picked out of the hat
(17:58):
so that it would make it easier for you to understand.
But I can tell you
that Keith Fitzgerald, who I think is a genius when
it comes to picking stocks, to how to do things,
he loves value cost averaging.
He's able to automate it, all of that.
(18:19):
But in the long run, depending on what the stock
does or the ETF does, value cost averaging can really
make you more money.
Now again a lot of you are gonna look at
this and say I know Suze that's a whole lot
of work and I can tell you I can see
(18:39):
KT's don't, don't no no KT don't say anything yet. No, no,
she's just sitting there and she's got her little finger
above her little lips, but anyway, OK, I get that
it's small.
But again, more is always better than less. Just remember
(19:00):
that I said that. By the way, I'm going to
put an example of this, a written example of this,
up on the Women and Money Community app that you
can download by going to Apple Apps or Google Play.
It's written out for you so you can see the
main point of me doing this is just so that
(19:21):
you can understand.
The difference between lump sum, dollar cost averaging, and value
cost averaging. OK, KT take it away.
KT (19:33):
Here's my question. Suppose because I, you, I'm following you
until I get to month 3 where the price went
to $90 a share. So with my $1000 I have
13.33 shares.
And my question is...
Suze (19:54):
Not with your thousand...
KT (19:55):
No, no, no, no, no, no, no, wait, wait, wait, sorry,
I had to in order to have the value of
the portfolio reach let's say 5000...
Suze (20:05):
No, 3000 because it's month 3.
KT (20:07):
All right, so month 3, all right.
Here's what I want to say. What if I'm in
month like 8 and I run out of money?
Suze (20:16):
No, you have $12,000 to begin with to spend. You
have it. It's sitting in a money market account. There
is no way you can run out of money because
the more the stock rises, why are you laughing?
Why are you laughing? I just did a great explanation.
KT (20:38):
Are you sure you want me to come to this
class because I'm sitting here thinking, all right, I get
month 1, 2, 3, and even month 4. Now all
of a sudden I go to month 5 and I'm
still ahead of the game, but then I'm at 6
till the end of the year and it's back at 120.
(20:58):
So I'm wondering why, why did I have to figure
out all of this when...
I probably could a dollar cost averaged.
Suze (21:06):
So you're saying why not just dollar cost average?
KT (21:09):
It's a lot of work.
Suze (21:10):
It's a lot of work, but it's not that much work.
It's sounds like a lot.
KT (21:16):
Well you have to pay attention every single month.
Suze (21:19):
When you go to actually invest, KT. All you have
to do is remember what your target value goal is, which is...
KT (21:28):
I set that myself, right?
Suze (21:29):
Well, obviously if it's $12,000 divided by 12, it's $1000
a month.
So you know by the 3rd month, you need to
have $3000 of portfolio value. That's why it's value cost averaging.
Value in that account.
With dollar cost averaging, you want to just invest $1000
(21:51):
a month.
KT (21:52):
And and see what it buys.
Suze (21:53):
Right with value cost averaging you're getting more value for
your dollars because when the stock goes up, you buy
less when the stock goes down you actually buy more.
And in the long run you make more money. So
all you have to do, everybody, if you're going to
(22:14):
do this, which I suggest you start doing it, is
just look at how many shares you own.
What those shares are worth, what your portfolio is worth
that month. If it's the 3rd month, the portfolio needs
to be worth $3000 if you're doing $1000 a month,
(22:37):
so to speak, value.
And you just top it up in terms of how
many shares, how much do you need to invest dollar
wise to make the portfolio worth $3000 and what will
the dollars that you need to top it up with
buy in shares.
KT (22:57):
So Suze, out of these three, your favorite now is
value cost averaging.
Suze (23:03):
Yes.
KT (23:03):
Let's go back to Super Bowl, everybody, where we began.
Suze (23:06):
I just want Kansas City.
KT (23:08):
We're gonna do a lump sum win with Kansas City Chiefs, baby!
Suze (23:12):
All right, darling. So go Kansas City. Go Kansas City.
KT (23:15):
Patrick, Suze's watching you.
Suze (23:18):
I got news, everybody. If he wins this Super Bowl,
he's gonna be the very 1st $1 billion man in
terms of a contract.
KT (23:28):
Is that right?
Suze (23:29):
In my opinion, without a shadow of a doubt.
KT (23:31):
Oh my God, the GOAT. The rich GOAT.
Suze (23:34):
He then will be the GOAT over Tom Brady.
In terms of Tom never won 3 in a row.
No one won 3 consecutives.
This is the first time, so everybody...
KT (23:47):
Let's make history tonight.
Suze (23:48):
All right, so everybody, there's only one thing that I
want you to remember when it comes to your money,
and it's this
cost averaging. That's all I want you to know. All right,
go Kansas City. Bye bye.
February 9, 2025. Welcome everybody to the Women and Money
podcast and everybody smart enough to listen. Today is...
KT (00:37):
Super Bowl Sunday!
Suze (00:39):
And Suze School with KT KT, it's Super Bowl.
KT (00:45):
Who's gonna wait, who's gonna win?
Suze (00:47):
Wait, how long
have Colo and I waited for this day.
KT (00:52):
They... since last Super Bowl. They both love football so much
and it's like Colo's #2 sport. His number one is
really soccer, you know, which is European football, but he
loves this with Suze more than life itself, and they
both laugh because I'm a very newcomer to the sport
(01:13):
of American football.
Suze (01:14):
Yeah, 20 some odd years, KT, you have to get
that you have been watching football Super Bowls with me
for over 20 years, so don't, don't go blaming it
on that you're a newcomer when it's 20 years old.
KT (01:30):
I still am a newcomer.
Suze (01:31):
No, you're somebody who just like with a Roth IRA,
you refuse to get it.
KT (01:37):
No, it's not true.
What isn't true?
Suze (01:40):
I never grew up with football ever, so you're the
only person that I ever experienced football with.
For 20 some odd years now 24 years.
KT (01:50):
Ok, so 20 Super Bowls, that's not a big deal.
OK, let's continue. Chiefs are gonna win, everybody.
Suze (01:58):
So did you all like my little Suze thing that
I put out yesterday, everybody, you know, that little character
I that...
KT (02:06):
Yeah, her little emoji.
Suze (02:08):
My emoji. Do you like...
KT (02:09):
Her football emoji.
Suze (02:11):
I love it. That was so sweet. Oh my God, I loved it,
KT (02:15):
She tried to do one of me, but it didn't work.
Suze (02:19):
And everybody, do you know why it didn't work?
KT (02:21):
I didn't like the way my hair looked.
Suze (02:23):
On an emoji. Can you imagine?
KT (02:25):
I said, Suze, that looks like my face, but my
hair doesn't look like that.
She had this funny like hairstyle and it was gray.
I said, I have white hair. I have silver white hair.
I don't have gray hair. It's, it never went gray.
It just went from...
Suze (02:39):
Can you believe this everybody went from an emoji. Wait, KT,
tell them about the little ad we did the other
day for the, so everybody, the Ultimate Retirement Guide
For 50+ is finally coming out in paperback on February 18th,
so Barnes and Noble, la da da, they all requested,
(03:00):
would I just do a little blurb on it, you know,
just tell everybody about it, tell them what I did, KT.
KT (03:06):
She's in bed. She just, um, woke up and she said, KT,
can you take a video of me? And I said,
doing what?
And she had on her bathrobe and she said just
take a just put the camera on. So I turned
it on and she did this whole thirty second commercial in bed
in her pajamas with her book...
Suze (03:26):
In my robe.
KT (03:26):
In her robe. It's hysterical.
Suze (03:29):
I don't wear pajams.
KT (03:30):
She does. She wears a night shirt.
Suze (03:31):
Not often.
KT (03:33):
You wear a night shirt. You love your night shirt.
I know you love it. All right, so, so wait,
let's go back to the Chiefs versus the Eagles. I
want the Chiefs to win because I want to see
history take place. Repeat.
Suze (03:50):
It would be a three-peat. That's what it's called it
3 times he's done it.
KT (03:55):
Three-peat?
Instead of it sounds like a repeat, but no one's
done this.
Suze (04:00):
Three, three times.
KT (04:02):
Three consecutives.
Suze (04:05):
It's called a three-peat. Pat Riley owns the trademark on
that word, by the way.
KT (04:09):
Does he?
Suze (04:09):
I think so.
One day you'll have to tell when Pat Riley called,
but that's besides the point.
KT (04:14):
I didn't know who that guy was either.
Suze (04:18):
Anyway.
KT (04:19):
So Super Bowl Sunday today, I can't wait and my
biggest excitement is I get to watch the commercials, which
is what I love around Super Bowl.
Suze (04:29):
OK, today is Suze School, however, KT and this is
where I think it's important.
That people know the difference truly dollar wise between three
different ways to invest. One is lump sum investing. One
(04:50):
is dollar cost averaging, which I've been talking about for years,
and the third is value cost averaging. So are you
ready
to get out your Suze notebooks, you need to write
this down for the Suze school. OK, so now listen
KT now just wait, don't say anything. I can see
(05:12):
you want to say something. Don't say anything. I'm going
to give a detailed example now.
Where I am actually going to use numbers and compare
lump sum investing with dollar cost averaging with value cost averaging.
KT (05:29):
OK.
Suze (05:29):
All right, so let's just say.
You had an inheritance. You got a bonus. I don't
know what happened, but all of a sudden you have
$12,000 that you want to put into the market. Now
whether it's an individual stock, an exchange traded fund, it
does not matter, but let's just say you want to
(05:51):
invest $12,000 in an ETF an exchange traded fund. Let's
just say that's true for right now.
And the ETF or the stock, whatever it may be,
is trading at $120 per share.
For lump sum investing, you simply take the entire lump
(06:13):
sum of $12,000. January 1st of let's just say 2024,
and what do you do? You buy 100 shares of
this stock or ETF.
And therefore you're done for the year you bought it
you don't do anything else and during the year it
(06:36):
goes up a little, it goes down maybe a lot
up it's all over the place, but at the end
of the year it's back to $120 a share.
That means at the end of the year after 12
months your investment is still worth $12,000 and you're kind
(06:58):
of happy because at least you're not down even though
you're not up you haven't lost anything.
Dollar cost averaging.
This is where you take the amount of money, the
$12,000 that you want to commit for this year.
But rather than investing it all at once, you divide
(07:20):
the amount you want to invest for the year by 12.
12 months. So what that means in this case is
you divide $12,000 by 12, and you now know you
are going to invest $1000 of fixed $1000 every single month.
(07:44):
For one full year.
And let's say you start to do that. The very
first month, you're going to invest $1000 and this stock
or ETF is at $120 a share.
That allows you to buy 8.33 shares. Just simply divide
(08:09):
$1000 by the price of the share. This case $120
and that gives you the number of shares you can
buy in month two. It's at $100 per share.
You now are investing $1000 so $1000 divided by 100
is $10 so that allows you to buy 10 shares.
(08:32):
Now it goes down to $90 per share.
So you can buy 11.1 shares with your $1000 the
third month. The fourth month it goes back up to
$100 per share, allowing you to buy 10 shares for
your $1000 investment. Month 5, it stays at $100 per share.
(09:00):
Again, allowing you to buy 10 shares and just for
ease here, let's just say month 6 through 12, it
goes up big, it goes up 20%, it goes up
to $120 a share again.
So each month you get to for your $1000 per month,
(09:22):
you get to buy 8.33 shares.
So at the end of all this, you have approximately
107.74 shares at the ending value of $120 a share.
So now you have $12,928.20. Now this is a gain
(09:48):
compared to lump sum investing, which is why over all
these years.
I've been telling you all to do dollar cost averaging.
However
Value cost averaging is something that I have been trying
to figure out. Keith Fitzgerald absolutely loves it. He's been
(10:13):
able to automate it just so you know. However, it's
something that I really had a hard time figuring out,
so I sat down and I really put my mind
to it and I finally get it. Now even though
in this particular situation.
You're going to see it's not a lot of difference,
(10:36):
but remember the goal this year is to make your
money make more money, but any amount of money that's
more than something else is more money. So just listen
closely now. With value cost averaging instead of investing a
fixed amount each month.
(10:58):
Like we just did $1000 a month with dollar cost averaging.
You adjust your investment to maintain a target portfolio value.
As if you had invested $1000 per month.
So you want your portfolio value every single month.
(11:25):
To go from 1000 to 2000 to $3000 all the
way up to where you had essentially invested $12,000 but
you want that to be the portfolio value every single time,
all right.
So are you ready now? Month one...
(11:47):
the stock or ETF is at $120 so these are
the exact same share prices as dollar cost averaging, right?
Month one, the stock or ETF is valued at $120
a share.
And you want your target portfolio value to be $1000
(12:10):
so you are going to invest $1000 and you're gonna
be able to buy 8.33 shares, but now month two.
It drops to $100 so your portfolio value though is
only worth at this moment in time $833. That's because
(12:35):
in month one you got to buy 8.33 shares. Now
when you're getting ready to invest again, the stock or
ETF is only worth $100 so your portfolio is worth
only $833.
But this is your second month and you have a
portfolio value target of $2000. So to reach the $2000 target.
(13:03):
You have to subtract $833 from the $2000 portfolio value target,
and that means you are short by $1,166.67 so you
now have to buy 11.67 shares.
(13:25):
Of the stock or ETF, did that make sense to you?
In the first case of dollar cost averaging, you always
are investing a fixed $1000. Here you are changing the
amount that you are investing every month so that you
can meet your target portfolio value which is going to
(13:49):
go up by $1000 a month.
Month 3.
Now the stock drops to $90 but now remember you
have a total of 20 shares at this point.
And therefore at $90 a share your portfolio value is
(14:09):
only worth $1800 but this is the 3rd month so
you're supposed to have $3000 so now you're going to
have to invest $1200.
Or 13.33 shares to bring the entire value up to $3000.
(14:32):
So now you have a total of 33.33 shares. Are
you getting this, everybody? I'll do a few more. Month four,
the stock now, let's just say goes back to $100.
And because you have 33.33 shares, your portfolio value is $3,333.33.
(14:54):
But this is month 4 and you're supposed to have $4000.
So if you subtract $3,333 essentially from $4000 you have
to invest $667 approximately so that you can buy 6.67 shares,
but now you have a total of 40 shares, but again.
(15:18):
40 shares is going to give you $4000 of an
investment portfolio value because it's worth $100 a share. Month 5,
it remains at $100 a share. So now though because
it's month 5 and you need to have $5000 of
(15:40):
a portfolio value, you're now going to buy 10 shares.
All right, you have a total of 50 shares, but
now month 6 through 12.
We're just going to say that the stock rises to
$120 a share.
And it's gonna stay there for all 7 months, so
(16:05):
you are going to have to invest essentially $1000 a
month for the next 7 months to keep your portfolio
value at where it should be just that simple.
Now by the end of the year you are going
(16:25):
to own 108.31 shares at $120 a share.
Is $12,997 at the final price.
Now pay attention here closely. The lump sum.
(16:46):
At 100 shares at $120 a share, you only have $12,000.
Dollar cost averaging.
You have 107.74 shares at $120 a share. You now
have $12,928.80 in your portfolio.
(17:09):
Value cost averaging even after all that work.
You have 108.31 shares at $120 a share. You now
have $12,997.20.
Lump sum...
Value cost averaging your $997.20 a head.
(17:34):
But compared to dollar cost averaging, you're only $68.40 ahead. Now,
While that's only a little bit of gain, as I
said previously, what you really have to understand is these
were just numbers that I picked out of the hat
(17:58):
so that it would make it easier for you to understand.
But I can tell you
that Keith Fitzgerald, who I think is a genius when
it comes to picking stocks, to how to do things,
he loves value cost averaging.
He's able to automate it, all of that.
(18:19):
But in the long run, depending on what the stock
does or the ETF does, value cost averaging can really
make you more money.
Now again a lot of you are gonna look at
this and say I know Suze that's a whole lot
of work and I can tell you I can see
(18:39):
KT's don't, don't no no KT don't say anything yet. No, no,
she's just sitting there and she's got her little finger
above her little lips, but anyway, OK, I get that
it's small.
But again, more is always better than less. Just remember
(19:00):
that I said that. By the way, I'm going to
put an example of this, a written example of this,
up on the Women and Money Community app that you
can download by going to Apple Apps or Google Play.
It's written out for you so you can see the
main point of me doing this is just so that
(19:21):
you can understand.
The difference between lump sum, dollar cost averaging, and value
cost averaging. OK, KT take it away.
KT (19:33):
Here's my question. Suppose because I, you, I'm following you
until I get to month 3 where the price went
to $90 a share. So with my $1000 I have
13.33 shares.
And my question is...
Suze (19:54):
Not with your thousand...
KT (19:55):
No, no, no, no, no, no, no, wait, wait, wait, sorry,
I had to in order to have the value of
the portfolio reach let's say 5000...
Suze (20:05):
No, 3000 because it's month 3.
KT (20:07):
All right, so month 3, all right.
Here's what I want to say. What if I'm in
month like 8 and I run out of money?
Suze (20:16):
No, you have $12,000 to begin with to spend. You
have it. It's sitting in a money market account. There
is no way you can run out of money because
the more the stock rises, why are you laughing?
Why are you laughing? I just did a great explanation.
KT (20:38):
Are you sure you want me to come to this
class because I'm sitting here thinking, all right, I get
month 1, 2, 3, and even month 4. Now all
of a sudden I go to month 5 and I'm
still ahead of the game, but then I'm at 6
till the end of the year and it's back at 120.
(20:58):
So I'm wondering why, why did I have to figure
out all of this when...
I probably could a dollar cost averaged.
Suze (21:06):
So you're saying why not just dollar cost average?
KT (21:09):
It's a lot of work.
Suze (21:10):
It's a lot of work, but it's not that much work.
It's sounds like a lot.
KT (21:16):
Well you have to pay attention every single month.
Suze (21:19):
When you go to actually invest, KT. All you have
to do is remember what your target value goal is, which is...
KT (21:28):
I set that myself, right?
Suze (21:29):
Well, obviously if it's $12,000 divided by 12, it's $1000
a month.
So you know by the 3rd month, you need to
have $3000 of portfolio value. That's why it's value cost averaging.
Value in that account.
With dollar cost averaging, you want to just invest $1000
(21:51):
a month.
KT (21:52):
And and see what it buys.
Suze (21:53):
Right with value cost averaging you're getting more value for
your dollars because when the stock goes up, you buy
less when the stock goes down you actually buy more.
And in the long run you make more money. So
all you have to do, everybody, if you're going to
(22:14):
do this, which I suggest you start doing it, is
just look at how many shares you own.
What those shares are worth, what your portfolio is worth
that month. If it's the 3rd month, the portfolio needs
to be worth $3000 if you're doing $1000 a month,
(22:37):
so to speak, value.
And you just top it up in terms of how
many shares, how much do you need to invest dollar
wise to make the portfolio worth $3000 and what will
the dollars that you need to top it up with
buy in shares.
KT (22:57):
So Suze, out of these three, your favorite now is
value cost averaging.
Suze (23:03):
Yes.
KT (23:03):
Let's go back to Super Bowl, everybody, where we began.
Suze (23:06):
I just want Kansas City.
KT (23:08):
We're gonna do a lump sum win with Kansas City Chiefs, baby!
Suze (23:12):
All right, darling. So go Kansas City. Go Kansas City.
KT (23:15):
Patrick, Suze's watching you.
Suze (23:18):
I got news, everybody. If he wins this Super Bowl,
he's gonna be the very 1st $1 billion man in
terms of a contract.
KT (23:28):
Is that right?
Suze (23:29):
In my opinion, without a shadow of a doubt.
KT (23:31):
Oh my God, the GOAT. The rich GOAT.
Suze (23:34):
He then will be the GOAT over Tom Brady.
In terms of Tom never won 3 in a row.
No one won 3 consecutives.
This is the first time, so everybody...
KT (23:47):
Let's make history tonight.
Suze (23:48):
All right, so everybody, there's only one thing that I
want you to remember when it comes to your money,
and it's this
cost averaging. That's all I want you to know. All right,
go Kansas City. Bye bye.
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