After some requests from AFM readers regarding my two posts from last week on the 10 & 50 worst months in the S&P’s history, I went back to my trusty spreadsheet an ran some numbers assuming:
A lump sum investment of $1,840 on the last day of September, 1929 and $10 per month ($1,840 over 184 months) invested on the last day of each month from September, 1929 through January, 1945.
Here’s a look at the chart:
According to my numbers, dollar-cost averaging $10 every month throughout that 15+ year period would have grown to $3,541, for a personal rate of return of 8.01%not too shabby considering that this was during a depression! Now, my numbers DO NOT include fees, so the actual account value would be worth less than $3,541.
The bottom line is that dollar-cost averaging works best during a down or sideways market. Maybe that’s something we should all keep in mind during this market.