Stumbled across the dollar cost averaging chart on my 401k statement and it blew my mind

I was going through my company retirement plan paperwork last night and noticed this little graph showing how investing the same amount every month for 20 years smooths out the market ups and downs. Turns out the average cost per share was way lower than I thought it would be because I bought more when prices were low. Has anybody else found a hidden detail in their investment statements that changed how you thought about your savings?

3 comments

3 Comments

hugoj124d ago

Found it helpful to set up automatic transfers right after payday so I never had to think about timing the market. Over maybe five years I noticed my average share price was definitely lower than if I had tried to buy in chunks. Your mileage may vary but for me it took the stress out of watching the daily ups and downs.

knight.dylan4d ago

Lower average cost is usually just math working in your favor unless the market was on a straight up streak the whole time. Dollar cost averaging works best in choppy or down markets where you buy more shares at lower prices. If it was a five year bull run then lump sum probably would have outperformed. But yeah the stress reduction is real and that's worth something too. People underestimate how much panic selling or hesitation costs them compared to just automating it.

the_jake4d ago

You said "took the stress out" - did you ever check if automatic buys actually lowered your cost basis vs just skipping the mental hassle?