Great Podcast and new website layout, I would like to share my thoughts.
Question 1- Lack of knowlege. I dont think worring about your knowledge is that important. I think it is more important to work out some goals and put down on paper what you are wanting to achieve and some targets. Working out your Fire Number is a good start. You need to make a plan on how you will do this and what your risk tolerance is. As you plan this out and start to invest, you can monitor you investments and returns against your plan. If you are getting closer to your goals, you are then doing a good job and you dont need to beat yourself up your knowledge. If it is not on target, you will need to either get help or learn why.
If you dont have a plan you will never have a benchmark to know how you are going. You can always get help once you start and you will find that as you progress you will need more specific advice from a professional like an accountant. There is no shame in asking for help, you can’t know everything. Just doing something puts you so far head of the rest of the everyday punters, who cant be bothered with investing.
Question 2 – Lump Sum vs Dollar Cost Averaging. One thing I do when investing a larger sum is to look at what potential upcoming dividend could be. Let’s pretend, I wanted to invest a lump sum of 5000 shares of MLT, I found it easier to buy a lump sum say 2 -3 months out before they would declare a dividend. These are typically twice a year or 4 times with an EFT. I would look at date and amount for the same period last year. Say the dividend was 8 cents and date was July. I would multiply this out by the number of shares I was looking to buy. In this example, it would be $400. If I was buying in May, I would then rationalize if I buy now, I will only loose out if the shares fall by $400 or 8 cents per share before the dividend in July.
Most of the time the shares would be worth the more that I paid and the dividend was close to what it was for the same period last year. Only twice did the shares fall but it felt I was cushioned buy this dividend.I found this a good way to cope with making a lump sum share purchase.