Comparison of investment performance in SET50 stocks and SET50 index funds with Dollar Cost Average (DCA) strategy

Abstract

Nowadays, investing in the stock market is widely known. The number of applicants that register an account through the SET trading system and applications for securities trading via the Internet is continually increasing. Some of the investors are new to the stock market. It is because many investors attempt to invest in assets that yield higher returns than bank deposits such as stocks and mutual funds. This research aims to compare the performance of investment in SET50 stocks and SET50 index funds using the Dollar-Cost Averaging (DCA) strategy by analyzing the change in portfolio value between 2016 and 2020. An analysis is considered yearly (short-term), 3-years (medium-term), and 5-years (long-term) investments. To compare the performance of investment, five indicators include the internal rate of return, the average cost of investment, expected rate of return, investment risk, and the sharp ratio. The data used in the study were the closing price of SET50 stocks and the net asset value (NAV) of SET50 index funds. The results showed that, with the DCA strategy, investing in SET50 index funds was more effective than investing in SET50. This can also lead to two extended conclusions. First, if the investors are risk-lovers, they should invest in SET50, but if investors are risk-averse they should invest in the SET50 index fund. Second, investing with the DCA strategy in SET50 stocks (high volatility) generates higher returns than SET50 index funds (low volatility) during the bull market but yields more negative returns than SET50 funds during the bear market as well. Thus, the DCA strategy is suitable for highly volatile securities under a bull market and securities with low volatility during a bear market.