I just came up on my one year anniversary at work. I took a detailed look at my 401(k) the other day and was reminded of why Dollar Cost Averaging in investing is good idea. The two funds I have been invested in are down roughly 40% since I started investing but the value of my investment is up 5%. How is that possible?
Dollar Cost Averaging, it’s basically pumping in money each month which changes your average cost per share. For example if I invest $1000 a month I am able to but 10 shares when it costs $100 a share but when the price of the stocks goes down to $50 shares I am able to buy 20. So I bought my 30 shares at an average price of $67. It works out really well especially for the long haul.
That’s why I was so confused to hear people saying how they stopped investing in their retirement funds or stopped investing in the market as stock prices where going down.
A couple other notes:
- It has rained an absurd amount this spring. In fact it’s raining again right now.
- Sunday is the Eagleman triathlon, my big “A” race for the first half of the year. I am cutting back on my training volume this week, and things are feeling really good.