CI

Implementing a Value Averaging Strategy

by John Bajkowski and John Markese

FEATURE

Even a casual observer of the markets understands that the stock market moves both up and downoften
in strong, but short bursts. Investors
looking to commit funds to the market may be paralyzed with the fear of
investing a significant sum of money
just prior to a severe market downturn. However, by standing on the
sidelines, investors lose out on participating in the long-term superior returns of the stock market. The issue is
one of market timing, and no matter
what the currently popular market
prognosticator says, it is practically
impossible to consistently call market
tops and bottoms.
Dollar cost averaging and its variations, such as value averaging, offer
investors an alternative to the all-ornothing approach, allowing them to
ease into the market over time, which
reduces the timing risk. The mechanical aspects of averaging provide an
investment discipline, require no market forecasts, and are relatively simple
to initiate.
The Concept
Dollar cost averaging is simple in
concept: Invest a fixed amount at equal
intervals and continue to do so over a
long period. The result is that more
shares of a stock or mutual fund are
purchased when prices are relatively
low, and fewer shares are purchased
when prices are relatively high. This
can result in a lower average cost per
share over time.
Value averaging is a variation: Instead of investing a fixed dollar
amount each interval, the amount invested varies so that the total value of
the investment increases by a fixed
sum or percentage each interval. If
share price increases alone cause the
total value of the investment to increase above the planned fixed
amount, then the investor must sell
shares instead of adding to the investment.
July/August 2001

Neither approach requires a forecast of market direction. And with both

plans, the discipline of periodic investment during all market situations
and the continuation of the plan over
long investment periodsof five
years, 10 years, 20 years, or even
longerprovides substantial benefits,
not the least of which is simply getting
started in an investment program in
the first place.
Investors who should use dollar cost
averaging or value averaging include:
Any investor with a pool of cash
or periodic cash flows who seeks
to invest in a risky asset, who has
a long-term investment horizon,
and who feels that he or she cannot forecast short-term move in
the market.
Any investor who is having difficulty finding the right moment to
move into the market (or back into
the market if he or she was temporarily out of the market).
One key to the successful use of an
averaging approach is to choose an
appropriate long-term horizon. In order to avoid the potential disaster of
placing a substantial portion of your
portfolio in risky investments at the
high point of a market cycle, take a
minimum of two years, investing
monthly or quarterly, to complete the
move into the market. Five years is an
ideal period, albeit a bit too long for
many impatient investors.
Those investors without a significant pool of cash currently available
but who instead have cash periodically available, are spared the temptation of rushing a large sum into the
market all at once. These investors are
already structured for dollar cost averaging, but without a plan, they may
never start an investment program.
Another consideration is the frequency of the investments. Any periodic interval could be used and, of
course, any amount or value. Investing often enough over a uniform time

interval is important, and every quarter, two months, or month is reasonable. Investing weekly, however, is
probably overkill, while waiting every six months or every year to invest
is too infrequent and may defeat the
benefits of diversifying the investments over time in an ever-changing
market.
How They Work: An Example
Tables 1 and 2 show examples of
dollar cost averaging and its more
market-tuned cousin, value averaging,
illustrating the structure of each investment plan and highlighting the
differences. The investments in the
example are the Vanguard 500 Index
mutual fund (Table 1), a broad-based
large-cap stock index fund, and Janus
(Table 2), a growth mutual fund; the
time period covered is the last
five-and-a-half calendar years, January 1996 through June 2001; the investment frequency is quarterly. These
two averaging approaches could be
used to invest in individual stocks as
well.
Dividend and capital gains distributions are ignored to simplify the presentation, but for investors the reinvestment of all dividends and distributions should be part of any investment plan.
The examples use a $3,000 initial investment coupled with an $1,000 quarterly contribution for the dollar cost
averaging approach: $1,000 is invested
each quarter at the prevailing price of
the security.
For the value averaging approach,
the same $3,000 initial investment
along with a $1,000 quarterly increase
in value is used: The amount invested
quarterly varies such that the total
value of the investment increases by
$1,000 each quarter; if the share price
rises enough to cause the total value of
the investment to increase by more
than $1,000 during the quarter, shares
would be sold to hold the increase in
21

value to $1,000 for the period. For example, in the fourth quarter of 1998,
Janus jumped from a net asset value of
$26.85 to $33.65 (Table 2). To keep the
increase in value to $1,000, the following calculations must be made: At the
end of the quarter, the investor held
521.415 shares with a net asset value
of $33.65 before any changes, so the
value of the portfolio would have been
$17,545.61 (521.415 x $33.65), an increase of $3,546, or $2,546 more than
the planned $1,000 increase. Therefore, 75.65 shares ($2,545.61 divided
by $33.65, rounded) would have to be
sold.
While dollar cost averaging is unchanging, value averaging forces sales
when prices rise sharply and forces
larger purchasesmore shares purchasedwhen prices fall. For example

(Table 1), in September 1998 the share

price of the Vanguard 500 Index fund
fell to $94.56 from $105.30 the previous quarter. That resulted in the need
for a $2,326 investment under the value
averaging approach. Many value averaging investments during 2000 and
2001 are significantly above the $1,000
investment increase goals for both the
Vanguard 500 Index Fund and Janus
Fund.
The End Results
Under the value averaging approach
the ending amount is known, but the
total amount to be invested isnt when
you start the investment program. In
our example, the portfolio would grow
to $25,000 over the five-and-a-half
years. A total of $18,927 was invested
in the Vanguard 500 Index fund to

meet the goal, while $23,408 needed to

be invested in the Janus Fund to make
the portfolio grow to $25,000. Again it
should be noted that we did not reinvest distributions in our example.
Under the dollar cost averaging approach, the total value at the end of
the period could be any value, but the
total amount invested can be determined. Our $25,000 investment in the
Vanguard 500 Index Fund went to
$31,925, while it actually contracted to
$24,482 for the Janus Fund example.
When you start the dollar cost averaging program, the amount to be invested is known, but the ending
amount isnt.
Keep in mind that the goal of value
averaging is to increase the portfolio
by a fixed amount each period, and it
may take substantial total amounts

Table1. Averaging With Vanguard 500 Index (VFINX) Fund

Quarter
Dec1995
Mar1996
Jun1996
Sep1996
Dec1996
Mar1997
Jun1997
Sep1997
Dec1997
Mar1998
Jun1998
Sep1998
Dec1998
Mar1999
Jun1999
Sep1999
Dec1999
Mar2000
Jun2000
Sep2000
Dec2000
Mar2001
Jun2001

NAV
($)
57.60
60.42
62.89
64.59
69.16
70.69
82.73
88.65
90.07
102.21
105.30
94.56
113.95
118.90
126.83
118.55
135.33
138.08
134.15
132.59
121.86
107.07
113.02

Dollar Cost Averaging ($3,000 initial

investment, $1,000 invested each quarter)
Total
No. of
No. of
Shares
Total
Total
Amount
Shares
Value
Invested
Bought
O w n e d Invested
($)
(#)
(#)
($)
($)
3,000
52.083
52.083
3,000
3,000
1,000
16.551
68.634
4,000
4,147
1,000
15.901
84.535
5,000
5,316
1,000
15.482
100.017
6,000
6,460
1,000
14.459
114.476
7,000
7,917
1,000
14.146
128.622
8,000
9,092
1,000
12.088
140.710
9,000
11,641
1,000
11.280
151.990
10,000
13,474
1,000
11.102
163.092
11,000
14,690
1,000
9.784
172.876
12,000
17,670
1,000
9.497
182.373
13,000
19,204
1,000
10.575
192.948
14,000
18,245
1,000
8.776
201.724
15,000
22,986
1,000
8.410
210.134
16,000
24,985
1,000
7.885
218.019
17,000
27,651
1,000
8.435
226.454
18,000
26,846
1,000
7.389
233.843
19,000
31,646
1,000
7.242
241.085
20,000
33,289
1,000
7.454
248.539
21,000
33,342
1,000
7.542
256.081
22,000
33,954
1,000
8.206
264.287
23,000
32,206
1,000
9.340
273.627
24,000
29,297
1,000
8.848
282.475
25,000
31,925

Return on Investment

Value Averaging ($3,000 initial

investment, $1,000 increase each quarter
Total
No. of
No. of
Amount
Shares
Shares
Total
Total
Invested
Bought
O w n e d Invested
Value
($)
(#)
(#)
($)
($)
3,000
52.083
52.083
3,000
3,000
853
14.120
66.203
3,853
4,000
836
13.301
79.504
4,690
5,000
865
13.390
92.894
5,554
6,000
575
8.321
101.215
6,130
7,000
845
11.955
113.170
6,975
8,000
363
4.382
108.788
6,612
9,000
356
4.015
112.803
6,968
10,000
840
9.324
122.127
7,808
11,000
483
4.722
117.405
7,326
12,000
637
6.052
123.457
7,963
13,000
2,326
24.597
148.054
10,289
14,000
1,871
16.417
131.637
8,418
15,000
348
2.930
134.567
8,766
16,000
67
0.529
134.038
8,699
17,000
2,110
17.797
151.835
10,809
18,000
1,548
11.437
140.398
9,261
19,000
614
4.446
144.844
9,875
20,000
1,569
11.697
156.541
11,444
21,000
1,244
9.384
165.925
12,689
22,000
2,780
22.816
188.741
15,469
23,000
3,792
35.411
224.152
19,260
24,000
334
2.952
221.200
18,927
25,000

54 . 5 %

74 .1%

Historical mutual fund prices provided by Media General Financial Services through MSN MoneyCentral Investor.
Tableexcludesimpactof dividendand capitalgain distributions.

22

CI

invested to do so, conceivably much

more or much less in total than the
certain dollar cost averaging sum.
Which approach works best? While
either approach could dominate over
any time period, value averaging probably has the edge because it is more
aggressive. However, value averaging requires more monitoring, more
transactions costs and, because it triggers sales, potentially more tax consequences. Value averaging can be modified so no sales take place, with future
value increases adjusted to compensate. Also, the loss potential is greater
for value averaging because the total
amount that is required to be invested
is unconstrained.
Please note that you cannot judge
which approach did best in the examples simply by looking at ending
portfolio values because the amounts
invested and the timing of the invest-

ments differ for the two approaches.

The calculation to determine performance is called an internal rate of return calculation that takes into consideration all the cash flows and their
timing. These returns are given at the
bottom of each example.
Value Averaging Spreadsheet
Dollar cost averaging is a very simple
approach: An individual invests a
fixed amount of money at regular time
intervals. The value averaging approach is more aggressive and tuned
to the market because it forces you to
invest more money when the market
turns down and the total value of your
holding decreases. When the value of
your holding goes up, you invest less
money buying the higher priced shares
and potentially even selling shares.
Because the amount of money you
need to invest will change every pe-

riod with a value averaging strategy,

a spreadsheet is a handy tool to calculate the periodic investment amount.
One criticism of value averaging is
the forced sale of shares. Unless your
investment is in a tax-sheltered account, you may be forced to pay capital gains taxes earlier than planned.
Therefore, the spreadsheet allows you
to set whether or not you wish to sell
shares when the value of your fund
increases beyond the desired amount.
Figures 1 and 2 present our value
averaging spreadsheet. The spreadsheet can be downloaded either from
the Files from AAII or Spreadsheets section of the AAII.com Download Library (www.aaii.com/
dloads/). The Nasdaq-100 Trust
(QQQ) is used as an example in the
spreadsheet. To use the spreadsheet,
you would first enter the starting investment amount in cell A5 and the

Table 2. Averaging With Janus (JANSX) Fund

Quarter
Dec1995
Mar1996
Jun1996
Sep1996
Dec1996
Mar1997
Jun1997
Sep1997
Dec1997
Mar1998
Jun1998
Sep1998
Dec1998
Mar1999
Jun1999
Sep1999
Dec1999
Mar2000
Jun2000
Sep2000
Dec2000
Mar2001
Jun2001

NAV
($)
23.04
24.94
25.44
26.83
24.45
24.39
27.62
30.14
24.90
28.51
30.17
26.85
33.65
37.47
40.20
39.57
44.05
48.65
45.39
45.72
33.29
27.29
29.20

Dollar Cost Averaging ($3,000 initial

investment, $1,000 invested each quarter)
Total
No. of
No. of
Total
Total
Amount
Shares
Shares
Invested
Bought
O w n e d Invested
Value
($)
(#)
(#)
($)
($)
3,000
130.208
130.208
3,000
3,000
1,000
40.096
170.304
4,000
4,247
1,000
39.308
209.612
5,000
5,333
1,000
37.272
246.884
6,000
6,624
1,000
40.900
287.784
7,000
7,036
1,000
41.000
328.784
8,000
8,019
1,000
36.206
364.990
9,000
10,081
1,000
33.179
398.169
10,000
12,001
1,000
40.161
438.330
11,000
10,914
1,000
35.075
473.405
12,000
13,497
1,000
33.146
506.551
13,000
15,283
1,000
37.244
543.795
14,000
14,601
1,000
29.718
573.513
15,000
19,299
1,000
26.688
600.201
16,000
22,490
1,000
24.876
625.077
17,000
25,128
1,000
25.272
650.349
18,000
25,734
1,000
22.701
673.050
19,000
29,648
1,000
20.555
693.605
20,000
33,744
1,000
22.031
715.636
21,000
32,483
1,000
21.872
737.508
22,000
33,719
1,000
30.039
767.547
23,000
25,552
1,000
36.643
804.190
24,000
21,946
1,000
34.247
838.437
25,000
24,482

Internal Rate on Return

Value Averaging ($3,000 initial

investment, $1,000 increase each quarter
Total
No. of
No. of
Amount
Shares
Shares
Total
Total
Invested
Bought
O w n e d Invested
Value
(#)
(#)
($)
($)
($)
3,000
130.208
130.208
3,000
3,000
753
30.177
160.385
3,753
4,000
920
36.156
196.541
4,672
5,000
727
27.089
223.630
5,399
6,000
1,532
62.669
286.299
6,931
7,000
1,017
41.704
328.003
7,949
8,000
59
2.152
325.851
7,889
9,000
179
5.934
331.785
8,068
10,000
2,739
109.982
441.767
10,807
11,000
595
20.862
420.905
10,212
12,000
301
9.987
430.892
10,513
13,000
2,431
90.523
521.415
12,944
14,000
2,546
75.650
445.765
10,398
15,000
703
18.757
427.008
9,695
16,000
166
4.122
422.886
9,530
17,000
1,266
32.004
454.890
10,796
18,000
1,038
23.562
431.328
9,758
19,000
984
20.228
411.100
8,774
20,000
2,340
51.557
462.657
11,114
21,000
847
18.533
481.190
11,961
22,000
6,981
209.708
690.898
18,943
23,000
5,145
188.545
879.443
24,088
24,000
680
23.279
856.164
23,408
25,000

3.8%

16.4%

Historical mutual fund and industry prices provided by Media General Financial Services through MSN MoneyCentral Investor.
Tableexcludesimpactof dividendand capitalgain distributions.

July/August 2001

23

Figure 1.
Value Averaging With Selling of Shares
A
B
C
D
E
F
G
H
I
1 Value Averaging Worksheet, July/August 2001 Computerized Investing, AAII
2
Ticker QQQ
Security Nasdaq-100 Trust, Series 1
3
4
$1,000 Dollar Amount of Initial Investment
5
$1,000 Dollar Amount of Increase Desired Each Period
6
0 << Purchase Factional Shares? (Enter 1 if Yes, 0 if No)
7
Fractional shares WILL NOT purchased
8
0 << Do You Wish to Sell Shares to Force Portfolio to Maintain Desired Level? (Enter 1 if Yes, 0 if No)
9
Shares WILL NOT be sold to force portfolio to desired level
10
11
No. of
No. of
12
Share
Shares
Shares
Total
Amount
No. of
Shares
13
Price
Acquired
Owned
Value
to
Shares
Owned
14
Desired
or
Since Last
Before
Before
Invest
to Buy
After
15
Date
Value
NAV
Rebalancing Rebalancing Rebalancing (Redeem)
(Sell) Rebalancing
16
3/31/99
$1,000
52.469
0.000
$0.00
$1,000.00
19.000
19.000
17
4/30/99
$2,000
53.719
19.000
$1,020.66
$979.34
18.000
37.000
18
5/31/99
$3,000
52.031
37.000
$1,925.15
$1,074.85
21.000
58.000
19
6/30/99
$4,000
57.625
58.000
$3,342.25
$657.75
11.000
69.000
20
7/31/99
$5,000
56.594
69.000
$3,904.99
$1,095.01
19.000
88.000
21
8/31/99
$6,000
59.688
88.000
$5,252.54
$747.46
13.000
101.000
22
9/30/99
$7,000
60.188
101.000
$6,078.99
$921.01
15.000
116.000
23
10/31/99
$8,000
65.750
116.000
$7,627.00
$373.00
6.000
122.000
24
11/30/99
$9,000
73.500
122.000
$8,967.00
$33.00
0.000
122.000
25
12/31/99
$10,000
91.375
122.000
$11,147.75
$0.00
0.000
122.000
26
1/31/00
$11,000
89.688
122.000
$10,941.94
$58.06
1.000
123.000
27
2/29/00
$12,000 106.750
123.000
$13,130.25
$0.00
0.000
123.000
28
3/31/00
$13,000 109.500
123.000
$13,468.50
$0.00
0.000
123.000
29
4/30/00
$14,000
94.750
123.000
$11,654.25
$2,345.75
25.000
148.000
30
5/31/00
$15,000
83.125
148.000
$12,302.50
$2,697.50
32.000
180.000
31
6/30/00
$16,000
93.438
180.000
$16,818.84
$0.00
0.000
180.000
32
7/31/00
$17,000
89.438
180.000
$16,098.84
$901.16
10.000
190.000
33
8/31/00
$18,000 101.625
190.000
$19,308.75
$0.00
0.000
190.000
34
9/30/00
$19,000
88.750
190.000
$16,862.50
$2,137.50
24.000
214.000
35
10/31/00
$20,000
81.703
214.000
$17,484.44
$2,515.56
31.000
245.000
36
11/30/00
$21,000
62.984
245.000
$15,431.08
$5,568.92
88.000
333.000
37
12/31/00
$22,000
58.375
333.000
$19,438.88
$2,561.13
44.000
377.000
38
1/31/01
$23,000
64.300
377.000
$24,241.10
$0.00
0.000
377.000
39
2/28/01
$24,000
47.450
377.000
$17,888.65
$6,111.35 129.000
506.000
40
3/31/01
$25,000
39.150
506.000
$19,809.90
$5,190.10 133.000
639.000
41
4/30/01
$26,000
46.150
639.000
$29,489.85
$0.00
0.000
639.000
42
5/31/01
$27,000
44.730
639.000
$28,582.47
$0.00
0.000
639.000
43
6/30/01
$28,000
45.700
639.000
$29,202.30
$0.00
0.000
639.000
44

Total
Invested
$1,000
$1,979
$3,054
$3,712
$4,807
$5,554
$6,475
$6,848
$6,881
$6,881
$6,939
$6,939
$6,939
$9,285
$11,983
$11,983
$12,884
$12,884
$15,021
$17,537
$23,106
$25,667
$25,667
$31,778
$36,968
$36,968
$36,968
$36,968

Excel Spreadsheet available in the Download Library at www.aaii.com under Files From AAII.

dollar amount of the desired change

in cell A6. Allowing for two separate
entries is handy because some funds
require a higher investment initially
than for subsequent purchases. Two
entries also allow you to apply a value
averaging purchase or sales plan to an
already existing investment. To do this,
simply input the current value of your
holding in cell A5 and the portfolio
change amount in cell A6. If you wish
to use the spreadsheet to average out
of a security, enter a negative value in
24

cell A6.
Cell A7 is where you indicate if you
can purchase or sell fractional shares.
Sales or purchases are normally done
in whole share increments for stocks,
while mutual funds can usually be
purchased or sold using fractional
shares. Enter a 1 in cell A7 if you want
to work with fractional share amounts,
or 0 if you cannot. The message in cell
B8 confirms your selection.
Cell A9 is where you indicate if you
wish to sell shares when your portfo-

lio increases beyond the amount desired for a period. Enter 1 in cell A9 if
you wish to sell shares; enter 0 if you
do not wish to sell at those times. As
confirmation, a formula in cell B10
will report how the spreadsheet is calculating the reinvestment amount.
Column A lists the date of each rebalancing. You can use any time period desiredsimply input the values
in column A. Column B calculates the
desired value for each time period,
and column C is where you input the
CI

net asset value or share price of the

security you are tracking.
Column D allows you to enter any
share amounts that you might have
acquired, or even sold, since you last
rebalanced the portfolio. You would
use this column to input any shares
acquired through dividend reinvestment. Column D is also where you can
adjust for any difference in the amount
of shares you expected to acquire or
sell when you instructed your fund or
broker compared to the quantity actu-

ally transacted. Small differences

would be expected because of the time
lags.
Column E sums the total number of
shares from the last rebalancing and
accounts for any differences entered
in column D. Column F computes the
total value of your holding before the
current rebalancingmultiplying the
total number of shares owned in column E times the net asset value in
column C. Column G compares the
current value of your holdings to the

desired value and calculates how

much money you need to invest or
withdraw. If you specified that you
do not wish to sell any shares, a zero
will appear in this column when your
holding goes above your desired
amount. Column H calculates the
number of shares you will buy or sell
to rebalance, and column I estimates
the number of shares you will own
after the rebalancing. Column J keeps
a running total of the total invested in
the security.

Figure 2.
Value Averaging With No Selling of Shares
A
B
C
D
E
F
G
H
I
1 Value Averaging Worksheet, July/August 2001 Computerized Investing, AAII
2
Ticker QQQ
Security Nasdaq-100 Trust, Series 1
3
4
$1,000 Dollar Amount of Initial Investment
5
$1,000 Dollar Amount of Increase Desired Each Period
6
0 << Purchase Factional Shares? (Enter 1 if Yes, 0 if No)
7
Fractional shares WILL NOT purchased
8
1 << Do You Wish to Sell Shares to Force Portfolio to Maintain Desired Level? (Enter 1 if Yes, 0 if No)
9
Shares WILL be sold to keep portfolio at desired level
10
11
No. of
No. of
12
Share
Shares
Shares
Total
Amount
No. of
Shares
13
Price
Acquired
Owned
Value
to
Shares
Owned
14
Desired
or
Since Last
Before
Before
Invest
to Buy
After
15
Date
Value
NAV
Rebalancing Rebalancing Rebalancing (Redeem)
(Sell) Rebalancing
16
3/31/99
$1,000
52.469
0.000
$0.00
$1,000.00
19.000
19.000
17
4/30/99
$2,000
53.719
19.000
$1,020.66
$979.34
18.000
37.000
18
5/31/99
$3,000
52.031
37.000
$1,925.15
$1,074.85
21.000
58.000
19
6/30/99
$4,000
57.625
58.000
$3,342.25
$657.75
11.000
69.000
20
7/31/99
$5,000
56.594
69.000
$3,904.99
$1,095.01
19.000
88.000
21
8/31/99
$6,000
59.688
88.000
$5,252.54
$747.46
13.000
101.000
22
9/30/99
$7,000
60.188
101.000
$6,078.99
$921.01
15.000
116.000
23
10/31/99
$8,000
65.750
116.000
$7,627.00
$373.00
6.000
122.000
24
11/30/99
$9,000
73.500
122.000
$8,967.00
$33.00
0.000
122.000
25
12/31/99
$10,000
91.375
122.000
$11,147.75 ($1,147.75) (13.000)
109.000
26
1/31/00
$11,000
89.688
109.000
$9,775.99
$1,224.01
14.000
123.000
27
2/29/00
$12,000 106.750
123.000
$13,130.25 ($1,130.25) (11.000)
112.000
28
3/31/00
$13,000 109.500
112.000
$12,264.00
$736.00
7.000
119.000
29
4/30/00
$14,000
94.750
119.000
$11,275.25
$2,724.75
29.000
148.000
30
5/31/00
$15,000
83.125
148.000
$12,302.50
$2,697.50
32.000
180.000
31
6/30/00
$16,000
93.438
180.000
$16,818.84
($818.84)
(9.000)
171.000
32
7/31/00
$17,000
89.438
171.000
$15,293.90
$1,706.10
19.000
190.000
33
8/31/00
$18,000 101.625
190.000
$19,308.75 ($1,308.75) (13.000)
177.000
34
9/30/00
$19,000
88.750
177.000
$15,708.75
$3,291.25
37.000
214.000
35
10/31/00
$20,000
81.703
214.000
$17,484.44
$2,515.56
31.000
245.000
36
11/30/00
$21,000
62.984
245.000
$15,431.08
$5,568.92
88.000
333.000
37
12/31/00
$22,000
58.375
333.000
$19,438.88
$2,561.13
44.000
377.000
38
1/31/01
$23,000
64.300
377.000
$24,241.10 ($1,241.10) (19.000)
358.000
39
2/28/01
$24,000
47.450
358.000
$16,987.10
$7,012.90 148.000
506.000
40
3/31/01
$25,000
39.150
506.000
$19,809.90
$5,190.10 133.000
639.000
41
4/30/01
$26,000
46.150
639.000
$29,489.85 ($3,489.85) (76.000)
563.000
42
5/31/01
$27,000
44.730
563.000
$25,182.99
$1,817.01
41.000
604.000
43
6/30/01
$28,000
45.700
604.000
$27,602.80
$397.20
9.000
613.000
44

Total
Invested
$1,000
$1,979
$3,054
$3,712
$4,807
$5,554
$6,475
$6,848
$6,881
$5,734
$6,958
$5,827
$6,563
$9,288
$11,986
$11,167
$12,873
$11,564
$14,855
$17,371
$22,940
$25,501
$24,260
$31,273
$36,463
$32,973
$34,790
$35,187

Excel Spreadsheet available in the Download Library at www.aaii.com under Files From AAII.

July/August 2001

25

The spreadsheet is set up so, as more

rows are needed over time, you can
take any row at row 18 or below and
copy it down the spreadsheet as far as
desired.
Dollar cost averaging and value averaging provide a clear path for inves-

tors to follow. With the pathway

marked, taking the first few steps of
an investment plan should be that
much easier. Both dollar cost averaging and value averaging attempt to
reduce one of the largest fears of riskaverse investorsmoving a large sum

of money into the market just before a

severe market decline.

John Bajkowski is editor of Computerized Investing and AAIIs vice president

of financial analysis. John Markese is president of AAII.

Table 3. Spreadsheet Formulas

A3:
B3:
D3:
E3:

Ticker
QQQ
Security
Nasdaq-100 Trust, Series 1

A5:
B5:
A6:
B6:
A7:
B7:
B8:

1000
Dollar Amount of Initial Investment
1000
Dollar Amount of Increase Desired Each Period
0
<< Purchase Factional Shares? (Enter 1 if Yes, 0 if No)
=IF(A7=1,Fractional shares WILL be purchased,
Fractional shares WILL NOT purchased)
1
<< Do You Wish to Sell Shares to Force Portfolio to Maintain
Desired Level? (Enter 1 if Yes, 0 if No)
=IF(A9=1,Shares WILL be sold to keep portfolio at desired
level,Shares WILL NOT be sold to force portfolio to
desiredlevel)
No. of
No. of
Share
Shares
Shares
Total
Amount
No. of
Shares
Price
Acquired
Owned
Value
to
Shares
Owned
Desired
or

A9:
B9:
B10:

E12:
I12:
C13:
D13:
E13:
F13:
G13:
H13:
I13:
C14:
D14:
E14:
F14:
G14:
H14:
I14:
B15:
C15:

26

D15:
E15:
F15:
G15:
H15:
I15:
J15:
A16:
B16:
C16:
D16:
E16:
F16:
G16:
H16:
I16:
J16:
A17:
B17:
C17:
E:17:
F17:
G17:
H17:
I17:
J17:
A18:
B18:
C18:
E18:
F18
G18:
H18:
I18:
J18:

Since Last
Before
Before
Invest
to Buy
After
Total
Date
Value
NAV
Rebalancing
Rebalancing
Rebalancing
(Redeem)
(Sell)
Rebalancing
Invested
36250
=$A$5
52.469
0
=E17*C17
=IF(B17-F17<0,IF($A$9=1,B17-F17,0),B17-F17)
=IF($A$7=0,ROUND(G17/C17,0),ROUND(G17/C17,3))
=H17
=G17
36280
=B17+$A$6
53.719
=I17+D18
=E18*C18
=IF(B18-F18<0,IF($A$9=1,B18-F18,0),B18-F18)
=IF($A$7=0,ROUND(G18/C18,0),ROUND(G18/C18,3))
=E18+H18
=G18+J17
(Copy formulas in cells B18 and E18..J18 down
as many rows as necessary)

CI