New investors are often told that, when investing for the long term rather than chasing individual stocks, it is better to be invested for the longest possible time rather than trying to do "dollar cost averaging". DCA is the process of spreading out over time the purchasing of your investments. That way, you don't lose it all if the market drops the day after you invest.

Let me explain...

Imagine that it is 1994 and your rich uncle, Scrooge McDuck, has decided to gift you $1,200 per year. How generous!

He has stipulated that you must invest it in the S&P 500 - that's the top 500 companies in the world⁰.

He gives you two choices:

• Put $1,200 in on the 1st of January every year.
• Put $100 in on the 1st of the month every year.

How much money do you make in each scenario?

Get The Data

Kaggle has a download for the historic S&P 500 data. It goes from 1993 to 2024.

The data looks like this:

Experiment 1 - Time In The Market

Here's the algorithm we want to run.

1. Start in 1994
2. Set the investment as 1200
3. Get the Opening price of the first entry of the year
4. Get the Closing price of the last entry of the year
5. Calculate the percentage difference
6. Multiply the investment by the growth / fall
7. Add 1200 to the investment
8. Repeat from (3) for the next year.

Here's the code. I've made some assumptions - for example there are no trading fees, you buy at the opening price, and fractional dollars disappear. I'm aware this doesn't track perfectly but it isn't intended to; this is a rough and ready reckoner.

import numpy as np
import locale

#   Set for American currency
locale.setlocale( locale.LC_ALL, 'en_US.UTF-8' )

#   Location of the data
file_path = 'data.csv'

#   Load CSV into a NumPy array
data = np.genfromtxt(file_path, delimiter=',', names=True, dtype=None, encoding='utf-8')

# Count the number of unique years
unique_years = 0

#   Total investment
total_investment = 0

#   Yearly investment
yearly_cash = 1200

#   Start with an opening of 0
opening = 0

#   Loop through the years
for year in range( 1994, 2024 ):
    #   Add our yearly amount
    total_investment += yearly_cash

    #   Get data for the current year
    data_year = data[data['Year'] == year]

    #   Opening Price
    if ( 0 == opening ) :
        opening = data_year['Open'][0]

    #   Closing Price
    closing = data_year['Close'][-1]

    #   Percentage Change
    change = ( closing - opening) / opening
    movement = "✅ +" if change > 0 else "❌ -"

    #   Calculate change in investment
    total_investment = int( (1 + change) * total_investment )

    #   Print the running total
    print ( f"{movement}{abs(change*100):05.2f}% {year} Total investment is " + locale.currency( total_investment, grouping=True ) )

    #   Set the new opening price
    opening = closing

    #   Increment the number of years seen
    unique_years += 1

print ( f"After {unique_years} years you have invested {locale.currency( yearly_cash * unique_years , grouping=True )}" )
print ( f"Your total amount is {locale.currency( total_investment, grouping=True )}" )

It spits out:

After 30 years you have invested $36,000

Your total amount is $203,445

Experiment 2 - Dollar Cost Averaging

OK! Can we beat that with DCA? In this scenario you take your uncle's money and invest 1/12th of it on the first trading day of every month.

import numpy as np
import locale

#   Set for American currency
locale.setlocale( locale.LC_ALL, 'en_US.UTF-8' )

#   Location of the data
file_path = 'data.csv'

#   Load CSV into a NumPy array
data = np.genfromtxt(file_path, delimiter=',', names=True, dtype=None, encoding='utf-8')

#   Total investment
total_investment = 0

#   Monthly investment
monthly_cash = 100

#   Number of months run
number_of_months = 0

#   Start with an opening of 0
opening = 0

#   Loop through the years
for year in range( 1994, 2024 ):

    #   Get data for the current year
    data_year = data[data['Year'] == year]

    #   There should be 12 months in every year, but let's double check!
    unique_months = np.unique(data_year['Month'])

    #   Loop through the months
    for month in unique_months:
        #   Add our monthly amount
        total_investment += monthly_cash

        # Filter data for the current month
        data_month = data_year[data_year['Month'] == month]

        #   Opening Price
        if ( 0 == opening ) :
            opening = data_month['Open'][0]

        #   Closing Price
        closing = data_month['Close'][-1]

        #   Percentage Change
        change = ( closing - opening) / opening

        movement = "✅ +" if change > 0 else "❌ -"

        #   Calculate change in investment
        total_investment = int( (1 + change) * total_investment )

        #   Print the running monthly total
        print ( f"{movement}{abs(change*100):05.2f}% {year}/{month:02.0f} Total investment is " + locale.currency( total_investment, grouping=True ) )

        #   Set the new opening price
        opening = closing

        #   Increment the number of months
        number_of_months += 1
    #   Yearly total
    #print ( f"{movement}{abs(change*100):05.2f}% {year}/{month:02.0f} Total investment is " + locale.currency( total_investment, grouping=True ) )

print ( f"Your total amount is {locale.currency( total_investment, grouping=True )} after {number_of_months} months" )

The end result?

Your total amount is $193,891 after 360 months

That's $9,554 worse than shoving all the money in on January 1st.

Which... Look, $10k is $10k. I'd rather have it than not. But, in the context of these numbers, it doesn't feel significant. Does it?

Let's Graph It!

Conclusion

Dollar Cost Averaging is fine⁰. Over a long enough time you're probably marginally better off with lump-sum investing. But there's not much in it.

I'm sure you can construct scenarios where DCA is slightly preferential, and not every investment tracks the S&P500, and I'm sure my maths might be a little wonky, and obviously this is not financial advice. But, yeah, DCA if you want to; the difference in this example appears to be minimal.

As pointed out by Dave a company called Nordigen was set up to provide a free Open Banking service. It was quickly bought by GoCardless who said:

We believe access to open banking data should be free. We can now offer it at scale to anyone - developers, partners and Fintechs - looking to solve customer problems.

And, I'm delighted to report, it works! As a solo developer you can get access to your own data for free via the GoCardless APIs.

You'll get back a JSON file from each of your banks and credit cards with information like this in it:

{
   "bookingDate": "2023-07-11",
   "bookingDateTime": "2023-07-11T20:52:05Z",
   "transactionAmount": {
       "amount": "-2.35",
       "currency": "GBP"
   },
   "creditorName": "GREGGS PLC",
   "remittanceInformationUnstructured": "Greggs PLC, London se1",
   "merchantCategoryCode": "5812",
   "internalTransactionId": "123456789"
}

For foreign exchange, transactions look like this:

{
   "bookingDate": "2023-10-01",
   "bookingDateTime": "2023-10-01T21:41:40Z",
   "transactionAmount": {
      "amount": "-0.82",
      "currency": "GBP"
    },
    "currencyExchange": {
      "instructedAmount": {
         "amount": "1.00",
         "currency": "USD"
      },
      "sourceCurrency": "USD",
      "exchangeRate": "1.2195",
      "targetCurrency": "GBP"
   },
   "creditorName": "KICKSTARTER.COM",
   "remittanceInformationUnstructured": "Kickstarter.com, Httpswww.kick, 1.0 U.S. DOLLAR USA",
   "merchantCategoryCode": "5815",
   "internalTransactionId": "987654321"
}

Depending on your card and the transaction type, you might also get a few more bits of metadata.

Get started at https://gocardless.com/bank-account-data/. From there, it's a case of following the quickstart guide.

A few niggles

There's a bit of bouncing around. You've got to get an API key, get the institution ID, sign in, get redirected, get an ID from the callback, then get the bank account details. And then you can get the transactions!

Oh, and the access token only lasts a short while, so you'll need to either re-auth or use a refresh token.

Bank authorisation only lasts 90 days, so you'll have to refresh your details every 3 months. That's standard across all opening banking, but a bit of a pain.

GoCardless have pretty comprehensive bank coverage but they are missing a few which you might find useful.

Because there are so many financial institution in there, you might find it difficult to work out which one you need to log in to. For example, if you have a Barclays Credit Card, which of these is the right one for you?

{
    "id": "BARCLAYCARD_COMMERCIAL_BUKBGB22",
    "name": "Barclaycard Commercial Payments",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYCARD_COMMERCIAL_BUKBGB22.png"
  },
  {
    "id": "BARCLAYCARD_BUKBGB22",
    "name": "Barclaycard UK",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYCARD_COMMERCIAL_BUKBGB22.png"
  },
  {
    "id": "BARCLAYS_BUSINESS_BUKBGB22",
    "name": "Barclays Business",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYS_WEALTH_BUKBGB22.png"
  },
  {
    "id": "BARCLAYS_CORPORATE_BUKBGB22",
    "name": "Barclays Corporate",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYS_WEALTH_BUKBGB22.png"
  },
  {
    "id": "BARCLAYS_BUKBGB22",
    "name": "Barclays Personal",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYS_WEALTH_BUKBGB22.png"
  },
  {
    "id": "BARCLAYS_WEALTH_BUKBGB22",
    "name": "Barclays Wealth",
    "bic": "BUKBGB22",
    "transaction_total_days": "730",
    "countries": [
      "GB"
    ],
    "logo": "https://cdn.nordigen.com/ais/BARCLAYS_WEALTH_BUKBGB22.png"
  },

But, overall, it's an excellent service. Now I just need to find / write something to ingest the data and do something with it!

The basic gist is:

1. Minimise your expenditure,
2. Save 20x your annual expenditure,
3. Retire early while maintaining the same lifestyle.

That's it. There are a lot of crappy books about FIRE, but the concept is simple.

So I try to spend a little less, and I try to save a little more, and I dream about stopping work while I'm still young enough to enjoy it.

Of course, human psychology and habits are less simple. It is so tempting to buy a sandwich from Pret rather than take your own lunch. Sure, let's go to the pub after work and buy drinks which are cheaper at the supermarket. A holiday in the sun - why not?!

All those things increase your monthly expenditure. They chip away at your savings. And they increase your quality of life.

Now many of us have had a few-hundred days of being confined to home, and with the imminent threat of economic doom, we've been forced into a FIRE lifestyle.

(Yes, I know some people are getting takeaways every day, and spending hundred on videogames or office furniture. And others are being thrown into poverty.)

We've had a brief glimpse at what everyone doing FIRE would look like for the economy. No more sandwich shops, or travel agents, or quirky boutiques.

And we've had a brief glimpse at what our lives would be like stripped back to the minimum. No fancy food, no going anywhere you can't walk to, no meeting friends for a cheeky pint.

I'll be honest. It's not amazing, is it?

Could you survive stuck at home forever? Sure. Many people have it worse. And modern technology means that the world can come to you.

After a while, I daresay we'll all be Stockholm-Syndrome'd into believing that this is the life we want.

I don't think there's anything wrong with the FIRE philosophy. And I don't judge anyone for wanting to pare their spending back. But I worry that artificially forcing people into it will backfire. People will conflate the misery of the pandemic with the misery of not spending money, and we'll see an explosion of spending - and consequent lifestyle inflation - if this pandemic ever subsides.

It worked! Mostly... Here's where it didn't work, and what I learned from it.

Foreign Cash

Went to Hong Kong and withdrew £100 in local currency. Was completely unnecessary. Everywhere took card / contactless. We didn't stray away from the tourist trail, which may have helped. Carrying cash had a mixed effect on my anxiety. I was slightly nervous about getting mugged, but that was offset by knowing we could jump into a cab if we encountered any local difficulties.

Similarly, we went to Australia and took out the same amount of cash. We were driving in some fairly rural locations - although not the outback! - and wanted a small safety net. Again, completely unnecessary. Everything from parking meters to tiny ice-cream stands took contactless.

Spoke at a conference in Denmark. Was only a quick visit, so didn't take cash. Tried to buy a chocolate bar and drink in the train station, but was told my card wouldn't be accepted. I wasn't sure if it was the small sum, a foreign card, or something else. Bit weird, but the rest of the trip was fine.

Countless trips to the EU. I already had some € coins and notes. The first few times I took them - but they were never needed. Even in small bakeries my card or phone were accepted.

Emergency Cash

This was a horrific situation. I was due in hospital to undergo a surgical procedure and the minicab driver was screaming at me to pay him in cash. We'd booked the night before and paid in the cab firm's app. What we hadn't realised is that they'd outsourced the job to a different firm, who'd outsourced it to yet another firm. Somewhere along the way, the driver wasn't told it was a pre-paid fare.

We couldn't get hold of any of the firms so, reluctantly, we had to take cash out of an ATM using our credit card. We didn't have a debit card with us - because we never use it.

The cab firm eventually gave us a refund, and the credit card company agreed not to charge us their usual extortionate interest rates for cash withdrawal.

Lesson learned - always take a taxi which is required to accept card, or confirm with the driver before travelling.

Lunch

Most of the lunch stalls near my work take card. The ones that refuse don't get my custom.

Except for this amazing salad bar round the corner. I took out a couple of fivers to pay for a massive box of salad. I did ask the owner a few times if he'd consider taking card. He said the only way he could keep the price low was with minimal overheads. Considering how long the queue was to pay - which often prevented people entering the venue - I think it'd pay back quickly. But it's not my position to tell him how to run his business.

Cheques

LOL! I haven't paid with a cheque in years. Annoyingly, a few companies decided to send me refunds via cheque. My bank account doesn't have any local branches. So I either had to post them off, or use my backup bank. I think I'll start having to charge a cheque-processing-fee for old-fashioned companies.

I suspect that companies send out refunds by cheque because they know it's a pain. I bet lots of them go uncashed.

Odds and Sods

Our local off-licence tried to charge us an illegal card-fee. So I walked out and left the bottles on the counter. Then reported them to Trading Standards.

Similarly, a few places have insisted on a minimum transaction amount - this is against the terms of most providers. I've either picked up some sticks of gum, or bought elsewhere.

I received a few paper vouchers for a department store. They all had redemption codes, so I could use them online.

All of the plumbers and electricians I dealt with either accepted card or gave me their BACS details. A couple of clicks later and they were paid.

For group events at work, no-one wanted to deal with cash. We either transferred the money directly to whoever was organising things, or each paid separately.

Things I wasn't able to do

The UK doesn't have much of a tipping culture. I used to round up the bill, or add a fiver, if I was paying cash. These days, most places have a button on the credit card terminal with a suggested gratuity amount, or a free-form entry. I resent being forced to tip, so this seems like a sensible solution. Perhaps my tips don't go directly to the staff? That's not really my problem. Does that make me an arse?

No cash-in-hand discounts. Again, there's not much of a haggling culture in the UK. Occasionally I've been able to say "What's the best price you can do" but no money off for undeclared income.

Donating to charity. I don't give to people in the street, and I don't put coins in buckets. The majority of my charitable spend goes via Payroll Giving for tax purposes. But, most charities take contactless now:

Terence Eden is on Mastodon

@edent

Nifty! Charity using NFC payments to solicit for donations. pic.x.com/4hag3gzvet

---

Privacy

Oh no! Someone can track my spending!!! I literally don't care. Middle-aged bloke spends too much on beer and electronic gadgets. Shock. I catch the same train to work each day. Scandal!

Perhaps I'm being naïve. I'm not involved in anything revolutionary or seditious. I'm not buying illicit pharmaceuticals or private entertainment services. Maybe I'm complicit in bringing forth a dystopia - but I place a high value on convenience.

Please argue in the comments about why I'm wrong.

Lessons

In the UK, if you live in a city and have a credit card, it is absolutely possible to live without cash. I'm lucky that the public transport options where I've lived are modern and accept contactless.

With the exception of an angry taxi-driver, no one has been upset that I didn't want to use cash.

The vast majority of my transactions were via Google Pay. I waved my phone near the terminal, and the rail barriers open as if by magic.

Foreign travel was painless - but we weren't exactly going off the beaten track.

Tracking my own spending using Money Dashboard became much easier. We can look at our household budget and quickly see where we're wasting money.

So, could you go cashless for 2020? If not, what's stopping you?

I didn't know anything about the tax issues while I was working there - other than the fact I had some colleagues working in Luxembourg - otherwise (I like to think) I may have raised the matter internally. Not that the accountants would have listened to me...

Since leaving Vodafone, I haven't felt able to criticise it too harshly. Partly because many of my friends still work there, partly because I still do business with Vodafone, but - mostly - because I felt like a hypocrite.

As is normal in large, publicly traded companies, employees were awarded shares. Every year part of my remuneration was in the form of shares or share options. When I was made redundant from Vodafone, many of those shares vested.

However, for rather boring tax reasons, I wasn't able to sell all of them to help fund my new business. So I hung on to them. Until this week.

Two days ago, I sold every last share I had in Vodafone.

I don't know if you've ever sold shares before - but it's incredibly stressful. The easy way to do it is to set a sell price. So you say "If the shares hit X, sell". Then you sit back, relax, and wait for your target to be hit.

That's not what I did. I did it the scary way.

You say how many shares you want to sell, hit a big scary button, then you get given an offer for your shares. You then have 15 seconds to accept the offer!

That 15 seconds passes really fucking quickly. Is that enough? What if I get more next time? What if I get less? It's like a giant slot machine of doom. You hit "spin" again. In that 15 seconds you've lost £37.50. You hit spin again. You're now up £50 - all in the blink of an eye. So you spin again - it must be on an upward streak, right? Wrong! Down a tenner - all in the space of a minute.

It's enough to drive you insane. But that's not the worst part.

Eventually, you hit sell. It's an elating feeling. All those years of hard work. All that patience. All the times you silently said to yourself "one day... one day". Now suddenly realised as cold, hard cash. No more waiting. No more worrying. No more little nest egg.

The next day I did the stupidest thing imaginable. I checked the Vodafone share price.

Fool! It was up. Only a single point. But it was up. Had I waited a day, would I be richer? If I'd had the courage to wait just five more minutes? Would I be happier?

What if they went up the next day? And the day after that? Far from being a canny investor, was I just a schmuck? Every time I saw the share price would I silently curse myself for being an idiot? Oh no!

The next day, the Vodafone share price was down nearly 4%! I'd done it! I'd beaten the stock market! I was one of the masters of the universe! I was a share trading genius. Time to pack up my job and become a trader.

Or not. That single minute of panic was enough for me. I don't think the highs of the occasional win would offset the inevitable, terrifying losses. It wasn't pleasant gambling with my own money; I can't imagine how I'd feel if I lost someone else's hard earned cash.

So, on the one hand, it's good to know I'm not an utter psychopath. On the other hand, I'll never become one of the 1%.

I am indebted to Interactive Investor for making my share dealing as cheap and hassle-free as possible.

What am I going to do with my money? Go on a massive blow-out bender? Piss it up the wall? Stash it in the Cayman Islands?

Nah! I'm going solar powered! And that, dear friends, is a tale for tomorrow's blog...