Dollar Cost Averaging

Dollar Cost Averaging

This is supposd be done to reduce market risk by investing in stocks or funds or etc on a regular time interval in set amounts. I read that instead of investing in a lump sum at the beginning of the year, it's better to spread the cost basis out over a longer period of time, which guards you against fluctuations in the market price.

If you set up an automatic plan with a mutual fund family, like I did, it's almost a brainless activity that's supposed to benefit you in the long run by buying shares regularly without paying any heed to the share price being low or high on that specific day.

However, I have set up a taxable account and a roth ira account at American Funds for about a year now with a monthly automatic investment plan. Freakishly enough, as I was looking through the past transaction history of these little regular buy-ins, the share price is the highest of the month or at least higher than regularly on the exact date that my automatic investment plan would buy shares.

Then, it would go down and down... and then by the time, the next buy-in date comes around, it'd be up again!!!

Is this just a stroke of bad luck for a year or do mutual fund share prices drop toward the last week of the month (which is when I have set up the plan to buy for me)??????

Now, I'm even considering changing the investing date to the middle or beginning of the month but I wonder if it would make any difference?! Does the economy do better at specific times of the month than at other times OR am I just being paranoid and not looking at the big picture like dollar cost averaging asks you to?

Points to ponder as I'm leaving for Knotts Berry Farm for some fun with my cousin, her husband, and my nephew. Of course, I've never really been to Knotts Berry Farm since I was a teenager, but this time around, it should be fun since I'll be seeing it through my little nephew's eyes. Ah kids....they're so adorable....until they ask you for money.

:)