The Simplicity of Dollar Cost Averaging

Dear Investors,

Hope you’re well. Thank you for your continual support. We've streamlined this newsletter to help you efficiently grasp pivotal insights.

In todays letter

• Learning: Dollar cost averaging strategy and why most people use it

• News insights

  • Indonesia Growth Surprises as Consumers Shake Off Inflation

  • Amazon online sales improve despite economy fears

  • Why China has few good options to boost its faltering economy

• Key takeaways from William Green’s video about value investors

The Simplicity of Dollar Cost Averaging

In a nutshell, DCA involves investing a fixed dollar amount in an asset at regular intervals, regardless of price. This strategy often leads to buying more shares when prices are low and fewer when they're high, potentially lowering the overall average cost per share. Let's say you invest $100 in a stock each month: in month one, the stock is priced at $10, so you buy 10 shares. If the price drops to $5 in month two, you buy 20 shares. In month three, with the price at $20, you buy 5 shares. Over three months, you've acquired 35 shares for $300, averaging to about $8.57 per share.

Let's outline how to best utilize DCA:

1. Start Early & Be Consistent: The power of DCA lies in long-term commitment. Start early and maintain a regular investment schedule.

2. Automate Your Investments: Use automatic investment plans offered by many brokerage firms.

3. Stay Disciplined: Stay on course and don't let market fluctuations deter you.

4. Rebalance Regularly: Maintain your risk level by adjusting your portfolio's asset allocation as needed.

5. Review & Adjust: Though DCA is a 'set it and forget it' strategy, periodic reviews are necessary to ensure alignment with your investment goals.

In conclusion, DCA is a powerful tool that can help tame market volatility and foster patient, disciplined investing. As Charlie Munger aptly said, "The big money is not in the buying or the selling, but in the waiting."

News insights

Indonesia Growth Surprises as Consumers Shake Off Inflation

Indonesia's economic growth has exceeded expectations, with gross domestic product (GDP) increasing by 5.17% in Q2 2023, driven by strong consumer spending and investment despite inflation and a commodity slowdown. The resilience of Southeast Asia’s largest economy is also demonstrated by the positive performance of its manufacturing sector and robust household and government spending which counterbalance the reduced export rates.

[📝Full article]

Key takeaway

Based on Indonesia's robust economic performance, investors might find it useful to closely monitor sectors with the strongest growth, such as transportation, warehousing, and domestic services. However, it's important to remain aware of potential external vulnerabilities like the fluctuating global commodity prices and its potential impact on the Indonesian economy.

Amazon online sales improve despite economy fears

Amazon's Q2 2023 report showed an 11% YoY increase in overall sales, achieving $134.4bn, significantly exceeding analyst expectations. This performance was due in large part to improvements in their e-commerce business, bolstered by CEO Andy Jassy's initiative to optimize the delivery network, and a surge in advertising revenue.

[📝Full article]

Key takeaway

This earnings report indicates that despite broader economic concerns, Amazon continues to excel and adapt, signaling resilience in its diverse revenue streams. Investors should monitor this ongoing trend in the company's earnings, the strength of its advertising segment, and the effects of efficiency improvements on overall profit margins, using this information to inform their investment strategy.

Why China has few good options to boost its faltering economy

Despite the recent pledges by Chinese leaders to stimulate its faltering economy, tangible stimulus measures are currently unlikely to come due to China's high level of debt. The private sector seems to lack confidence in the Chinese economy, and an increasing fear is that China may be facing a period of much slower growth, possibly comparable to Japan's situation in the 1990s.

[📝Full article]

Key takeaway

From an investor perspective, this news signals a cautionary environment in China as traditional stimulus measures may not be viable or effective due to the nation's current debt scenario. Investors should watch for signs of structural economic reforms or alternative measures from China's leadership as a potential indication of future economic revitalization, but should be mindful of the potential for continued economic stagnation in the near term.

Key takeaways from William Green’s video about value investors

Here are six key takeaways:

1. Trust and Love as Initiators: Tom Gayner emphasizes the importance of being the initiator of trust and love in relationships. By offering these first, you invite reciprocation and build enduring, consistent relationships. This approach applies not only to personal relationships but also to business relationships.

2. Compounding of Trust-Based Relationships: Gayner also highlights the concept of compounding trust-based relationships. He suggests that by consistently offering value and trust to others, you can build a network of relationships that compound over time, leading to significant opportunities and benefits.

3. The Power of Goodwill: William Green discusses the idea of the compounding of goodwill. Treating people decently, honorably, generously, and kindly can have a significant impact over time, leading to a network of people who wish you well.

4. Assessing Trustworthiness: Gayner provides insights on how to assess the trustworthiness of others. He suggests looking at the trail a person leaves behind and how they've interacted with others. This can give you a sense of whether they make people around them better or worse off.

5. The Influence of Quakerism: John Spears discusses the influence of Quakerism on his life and investment philosophy. The Quaker belief in the equality and inherent worth of all people has shaped his approach to business and personal relationships.

6. Self-Forgiveness and Humility: Spears also talks about the importance of self-forgiveness and humility. Recognizing our own imperfections and being gentle with ourselves when we make mistakes is a key part of personal growth and maintaining a positive outlook on life.

[🎥Full video]

Stay tuned for more insights, and remember to stay curious, stay confident, and most importantly, stay invested.