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That crash of 2008 benefited those who stayed in the market and kept dollar cost averaging. The loss is temporary on paper. It isn't a loss until you sell it.
If you're invested in the market you need to have a long term view. Think years & years, the short term fluctuations should be insignificant to you. The constant ups, downs, and crises in the market will drive you nuts if you try to focus on it day to day. Info Guy is correct. Dollar cost averaging is one of the most important tools you have as an investor that will buffer the short term volatility in the market by allowing you to invest at a lower cost.
under more normal conditions dollar cost averaging is also the thing that will hurt performance.
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typically stocks used to be up 2/3 of the time and down only 1/3 so dollar cost averaging in actually hurt performance compared to lump sum.
since that model has happened in more than a decade dca has been working best.
If you're invested in the market you need to have a long term view. Think years & years, the short term fluctuations should be insignificant to you. The constant ups, downs, and crises in the market will drive you nuts if you try to focus on it day to day. Info Guy is correct. Dollar cost averaging is one of the most important tools you have as an investor that will buffer the short term volatility in the market by allowing you to invest at a lower cost.
It has not drove me nuts at all. I also have a after-tax account but that is for short-term gains. I am about 92% in Equities for my 401K and Roth IRA.
Fun thread. I've got approx 215k in my 401k/IRA accounts. I'm 46. It may seem a little low, but I also have some taxable accounts. I plan to retire at 60 and will have a pension+social security as will DW so I think we'll be o.k.
I am a little depressed after reading this thread! I'm 34 and have only about $11,000 in my IRA, but have about $42,000 overall between savings accounts and CDs. I'm single and have no kids and living with my parents temporarily while selling my house from when I lived in Houston (it's being rented right now). Hope to break 50K in net worth, excluding the house, by the end of this year. It's not much, especially compared to some others in this thread, but I am living nicely for myself overall.
Yes I was. I was very happy to see the market crash because of the DCA.
money we contribute in over time like in a 401k or ira has no choice but to be dollar cost averaged in but its exactly the fact that we have to dca that hurts us not helps us..
if you have a choice of dca or putting in a lump sum dca hurts you not helps you for 2 reasons. one is bonds and stocks generate far more than idle cash waiting to be put in over time .
2nd with markets going up 2/3 of the time and down only 1/3 of the time long term while you may catch a dip now and then for the majority of the time your buying less shares at higher prices and not more shares at lower prices. with markets typically having higher highs and higher lows as time goes on the fact you have to dca does you more harm than good...
ask yourself this:
if dca really helped why wouldnt all of us who eventually reach our allocation goal of the percentage of stock we want to own just dump everything and dollar cost average back in again?
the answer is because you would do quite poorly in comparison.
dollar cost averaging only gives you a rainbow to look at in a storm like when when stocks plunge but in the long term scheme of things you give up more in gains than you get.
Last edited by mathjak107; 04-08-2012 at 03:14 AM..
I'm 33 and have less than most of cd it seems. But I do have zero debt.
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