Value Averaging: The Safe and Easy Strategy for Higher Investment Returns

by Michael E. Edleson

Michael Edleson first introduced his concept of value averaging to the world in an article written in 1988. He then wrote a book entitled Value Averaging in 1993, which has been nearly impossible to find—until now. With the reintroduction of Value Averaging, you now have access to a strategy that can help you accumulate wealth, increase your investment returns, and achieve your financial goals.

Genres: Finance, Business, Money, Nonfiction, Personal Finance, Economics

256 pages, Kindle Edition

First published November 30, 1990

Reviews

[Gary Mesick · Rating 4 out of 5]

Edleson's investing approach allows you to actually is sell holdings when they are high and buy more of them when they are low. This is a variant of the venerable dollar-cost averaging, except here, when earnings grow faster than your target rate, you take some money off the table, putting it back in play when prices come back down to earth (or lower). Problem: he urges you to increase your investment year to year at the rate of expected growth (say, 10%) instead of at the rate of growth of your actual salary. How is this possible??? I have no earthly idea, unless you "sandbag" in the early years to give yourself more room as time marches on. The problem is that you may earn a better percentage that way, but you are likely to end up with less money. Still, plenty to think about here.

[Jacob · Rating 2 out of 5]

It's an interesting and useful concept but it really only needs a paragraph or one equation to describe it.

[Kursad Albayraktaroglu · Rating 4 out of 5]

A pretty comprehensive and useful introduction to value averaging strategies. Took off one star because the first half of the book is essentially a review of very basic stuff like calculating compound interest and basic DCA strategy.

I read this book only after I finished a book about a much more sophisticated value averaging method ("The 3% Signal" by Jason Kelly), hoping to find a more complete review of value averaging. In retrospect I probably should have read this book earlier. Recommended to anyone interested in expanding his/her knowledge of investing.

[Wlad · Rating 4 out of 5]

Esse livro não é sobre investimentos em geral, é sobre uma estratégia para fazer os aportes necessários para qualquer objetivo financeiro, desde que seja na renda variável. A premissa toda é que ao invés de aportar um valor fixo sempre, com essa estratégia é possível aportar mais quando tiver baixa e aportar menos quando tiver alta.
Tem bastante cálculo e fórmulas para calcular os aportes, e por isso, achei muito útil para montar detalhadamente a estratégia de aportes periódicos. Além disso, é perfeitamente possível usar a estratégia com um portfólio diversificado de acordo com a teoria moderna do portfólio.
Porém, talvez não seja tão vantajosa sobre a estratégia de rebalanceamento da teoria moderna de portfólio.

[Adam Ashton · Rating 4 out of 5]

First read in July 2015, was 5 stars, the fastest I’ve ever read a book (stayed up til 2am in a Washington DC hotel room to finish it) and immediately change my “investment strategy” (which was not a strategy at all)

Second read in 2024 as a reminder - dropped to 4 stars this time. one very simple but clever idea

[Gennady · Rating 4 out of 5]

Хорошая книга, которая доходчиво объясняет стратегии Dollar cost averaging и Value Averaging, тактик которые позволяют на среднесрочном окне обыгрывать рынок.

Dollar cost averaging - это покупка каждый период (месяц/квартал) акции на одну и ту же сумму денег. В этом случае при падении рынка ты покупаешь больше акций, а при росте - меньше, тем самым снижая среднюю стоимость акции и увеличивая доходность относительно рынка. Выигрыш небольшой - около 1%, и тем больше, чем волатильнее рынок.

Минус:
1. На длинном окне (>20 лет) и высокой инфляции/росте рынка - этот положительный эффект сходит на нет, т.к. Сумма обесценивается.
2. Эта тактика не гарантирует положительный результат: на постоянно растущем или падающем рынке без волатильности она проигрывает индексу.

Value Averaging - это пополнение счета так чтобы он рос на определенную сумму каждый период. Если рынок падает, то ты инвестируешь больше, если растёт то меньше и даже продаёшь.

Такая тактика даёт ещё большую доходность против индекса, так как более выраженно покупает внизу и продаёт вверху.

Из минусов:
1. На длинном окне эта тактика не ведёт к накоплению, так как после определенного срока доходность портфеля обеспечивает весь прирост и приходится продавать постоянно.
2. Сложно в имплементация, так каждый период разные суммы инвестирования. Если рынок сильно просел, где взять такую большую сумму? Должен быть запас наличных? Тогда нужно считать доходность всего портфеля с деньгами?
3. Если усложнять эту тактику так чтобы портфель прирастал не на одну сумму, а на инфлированную сумму и среднюю доходность, тогда это становится очень сложным в администрировании.

Мне кажется неплохой стратегией для среднесрочного накопления.

Ещё Заметки:
Рынок показывает на длинном окне (год и больше) mean reversion, т.е. Периоды роста больше среднего чередуются с периодами роста ниже среднего.
На коротком окне (до года) - рынок momentum driven, mean reversion менее вероятна (<50%).
Это значит что ребалансировка лучше работает на длинных окнах.

[Shan P S · Rating 5 out of 5]

A hidden gem. The book is very concise and focused on the Value Averaging (VA) strategy. The strategy is introduced after explaining the more familiar Dollar Cost Averaging (DCA) strategy. The strategy is given as a formula and spreadsheet. if the formula is hard to follow, then the spreadsheet can be used for running the strategy.

The book also stresses the (now well known) approach of Index investing. I am surprised to see the author's take on active mutual funds and how Index funds are the better option. He wrote this in 1991!

The discussion on investor behavior (herd behavior, investor overreaction and mean reversion) is way ahead of its time.

The author also proves the relevance and superiority of the strategy using back-testing and more interestingly, with Monte Carlo simulations. I do not remember other strategy books using simulations to compare performance.

The spreadsheet formulas given for Lotus spreadsheet can easily be tweaked and used in today's spreadsheets (Excel, Google Sheets, etc).

This book needs to be more relevant.

[Malin Friess · Rating 2 out of 5]

Value averaging takes dollar cost averaging one step further.

Doller cost averaging is buying the same amount of a stock or mutual fund on a repeating fashion. It is what most people do naturally when contributing to a work 401k. For example every pay $200 goes towards buying more shares of a mutual fund. Dollar cost averaging is advantageous because you buy when the shares price go up, and also when the shares price goes down (and a little bit more).

Value averaging encourages picking the amount of shares you want to buy per week. Then if the shares go up--you may actually sell. If the shares go down..buy more..such that the number of shares you buy weekly is consistent.

2 stars. This book is not that readable. Furthermore- I think Value advocates for too much emotional buying and selling with negative tax consequences.

[Federico · Rating 5 out of 5]

One of my must-read for new investors

I learnt an incredible amount of knowledge regarding how to and not to invest. Everything is rigorously mathematically proved.

Highly recommend

[Duncan · Rating 4 out of 5]

If you are looking for a detailed investment strategy, this is a good one. I mean, I can't tell from the maths, but the theory is sound.

[Clifford Phillips · Rating 5 out of 5]

This book, you need to read several times. Also the publishers web site has spreadsheets you can download for free.

[Dani · Rating 2 out of 5]

After more review, this doesn’t actually work as well as advertised. See criticism in value averaging wiki page.

Interesting concept. Besides saving for college not exactly sure how I would use it. I need to investigate more ….

[Marcio Alves]

Very nice and practical book. You can even download spreadsheets from the publisher websites.
If you want to know all the details involved in portfolio management with Value averaging, that's the right book to read !

[Christian · Rating 5 out of 5]

Awesome, awesome, awesome book on the math you need to manage your investments.

[Julian Bu · Rating 3 out of 5]

very good idea, but it doesn't need to be a book

[Edward Kuruliouk · Rating 4 out of 5]

A solid, simple, effective formula investment strategy. Coherently presented, the strategy is analyzed using historical data and Monte Carlo simulations then compared side by side to two alternative (similar) strategies: constant share(CS) and dollar cost averaging(DCA). [Spoiler Alert] Value Averaging beats CS and DCA.