Dollar-cost Averaging through a Crash

February 24, 2009 at 4:26 am Leave a comment

In my previous post, I wrote that it took the market 25 years to recover to its 1929 pre-crash levels. However, if you didn’t start out with a lump sum, but instead used dollar-cost averaging to buy into the market during this period, you would have generated some nice returns. This excellent post shows the calculations.

With current elevated market volatility, dollar-cost averaging makes even more sense as you are likely to pick up more shares at low prices. That strategy should work well in this environment — provided, of course, that you believe that the market will eventually recover!

Entry filed under: Market Conditions.

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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