I Love Dollar Cost Averaging!

Actually I love anything that gives my investment portfolio a legitimate edge. There is beauty in the simple and dollar cost averaging (DCA), or systematically investing into your 401k for example, is elegantly simple.

Actually, if you are contributing to a 401k/403b or similar there is a good chance you are already enjoying the investment benefits of DCA. Let’s examine why this is benefiting you.

At some point in the past, you (hopefully) filled out a form electing to contribute a certain amount of your hard earned paycheck directly into your employer’s retirement account. (For the sake of this article, let’s assume you are contributing to a 401k.) Generally, you elect to contribute a flat dollar amount or a specific percentage of your paycheck to your 401k. Let’s assume that you are paid every two weeks, 26 times per year. Let’s also assume that you elected to contribute $200 per paycheck to your 401k ($5,200 per year). To keep things simple we will also assume that you opted to put your $200 contributions into a S&P 500 Index Mutual Fund, a broad representation of large US companies.

Read More
1 13 14 15