Would dollar cost averaging be good for Index funds or stocks ?
April 17th, 2010
I don’t want to time the market. I want to use dollar cost averaging.
Would it be wise to use dollar cost averaging on index funds like s&p500, Dow Jones, etc.
Or would it be better use dollar cost averaging on 3-4 stocks like in GE PFE MSFT (I’m thinking of strong blue chip companies).
Thanks
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Posted in Best Index Funds | 
Tags: amp, blue chip companies, dow jones, index funds, p500, pfe, stocks
You can use it for either. when it comes to stocks or index funds its a question of risk. Owing 3-4 stocks is much riskier than owing an index, even over time.
Also consider cost, by dollar cost averaging in stocks you will be making 3-4 times as many transactions than buying and Exchange Traded Funds such as the SPY.
I think you’d be better off in an index fund. It’s better to have more diversification than you’d have if you just purchased a few stocks. You could even have more than one — an S&P 500 index and an international index, for example. And dollar cost averaging is a great way to invest in anything. Good luck!
do you know what your talking about? dollar cost averaging is when you are contributing over time at different rates. why are you saying you want to time the market if you will be dollar cost averaging?
You’re better off using dollar-cost averaging into mutual funds. A single stock (or even 4 stocks) won’t get you the diversification you want to properly take advantage of the ebbs and flows of the market. Single stocks for a smaller investor (less than $250,000 in investable assets) aren’t a good idea for long-term growth — which is what you’re looking for with dollar-cost averaging. Single stocks are much better for the "grab-and-go" method of investing when you want the highest possible return in the shortest period of time (again – for investors with smaller amounts of assets).
I wouldn’t be tied to index funds either. While they are less expensive than traditional mutual funds they lack the flexibility to move the "losers" in a declining market. An article in the NY Times recently said that those who use an advisor have a return that is almost 25% greater than those who don’t — more than enough to offset the fees.
Good luck!
Exactly. That’s what its all about. Investing a fixed amount every month so you buy fewer shares when prices are high, and more when prices are low. Dollar cost averaging is always the best strategy. You will come out better (especially with taxes) with index funds. Vanguard and T. Rowe Price offer low cost, no load index funds.