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I took another look at my investments today, and realized something.... I'm beating the stock market, and I haven't even had to think about it.
The markets are currently still down (year-to-date) -- Dow down about 5%, S&P down almost 4%. My investments however (both taxable and my Roth) are all UP for the same time frame. Am I master of stock picking? Heck no. I have 3 mutual funds right now -- a 2050 Target-date fund (Roth), S&P 500 index fund, and a Wilshire 4500 index fund (both taxable). YTD, the 2050 fund is currently up 5.8%; the S&P fund is up 2.5%; the Wilshire fund is up 7.4%.
So now my purpose in posting... The reason I've been able to "beat the market" here is dollar cost averaging. Since last October or so, I've had my investments on autopilot, making automatic contributions totaling about $325 every 2 weeks. I rode the market all the way down, buying shares the whole time. Now, I've been able to ride the market back up to its current level, with my average share price well below what it was back in October. Thus, once the markets recover to their October '08 levels, I will have made far more than what I would have by simply investing the same $5200 all at once back in October.
I only post this as a minor demonstration of why DCA can really be helpful, mostly for the new guys around here who want some investing advice. It's use is becoming more and more prevalent, but many still feel better about investing a lump sum all at once. Myself, I prefer my DCA, and I'm pretty happy with it--just look at the numbers. Happy investing, everybody.
The markets are currently still down (year-to-date) -- Dow down about 5%, S&P down almost 4%. My investments however (both taxable and my Roth) are all UP for the same time frame. Am I master of stock picking? Heck no. I have 3 mutual funds right now -- a 2050 Target-date fund (Roth), S&P 500 index fund, and a Wilshire 4500 index fund (both taxable). YTD, the 2050 fund is currently up 5.8%; the S&P fund is up 2.5%; the Wilshire fund is up 7.4%.
So now my purpose in posting... The reason I've been able to "beat the market" here is dollar cost averaging. Since last October or so, I've had my investments on autopilot, making automatic contributions totaling about $325 every 2 weeks. I rode the market all the way down, buying shares the whole time. Now, I've been able to ride the market back up to its current level, with my average share price well below what it was back in October. Thus, once the markets recover to their October '08 levels, I will have made far more than what I would have by simply investing the same $5200 all at once back in October.
I only post this as a minor demonstration of why DCA can really be helpful, mostly for the new guys around here who want some investing advice. It's use is becoming more and more prevalent, but many still feel better about investing a lump sum all at once. Myself, I prefer my DCA, and I'm pretty happy with it--just look at the numbers. Happy investing, everybody.
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