Weitz Investment – Navigating Market Volatility: Invest At Regular Intervals

This is the third installment in an eight-part series: Navigating Market Volatility. In simple terms, market volatility is the relative rate at which the market goes up and down. Dramatic shifts can be scary, even for the most experienced investors. To keep market swings from making you anxious, take steps to help you respond to volatility in a deliberate way.

2016 Hedge Fund Letters

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Navigating Market Volatility: Invest at Regular Intervals

In a perfect world, we would always know the right time to buy (low) and sell (high). But in the real world, market behavior is difficult, if not impossible, to predict. An investment strategy known as dollar-cost averaging can help take the guess work out of when and how much to invest. Dollar-cost averaging is an investment technique of purchasing a fixed dollar amount at regular intervals over a period of time. This long-term strategy can help reduce your exposure to the possible risks associated with making a single large purchase at the “wrong” time.

Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”

david einhorn, reading, valuewalk, internet, investment research, Greenlight Capital, hedge funds, Greenlight Masters, famous hedge fund owners, big value investors, websites, books, reading financials, investment analysis, shortselling, investment conferences, shorting, short biasIt has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More

With dollar-cost averaging, the dollar amount of each investment remains constant, but the number of shares you buy varies based on the share price at the time of a purchase. When the markets are up, you buy fewer shares; when the markets are down, you buy more shares. Dollar-cost averaging can relieve you of the stress of constantly monitoring market movements in an attempt to “time” your investments.

The charts below demonstrate how dollar-cost averaging works.

Scenario 1: Purchase a Fixed Dollar Amount Monthly

Monthly Investment Amount Price per Share Number of Shares Purchased
$500 $10 50
$500 $20 25
$500 $25 20
$500 $20 25
$500 $25 20
$2,500 $20 140


Scenario 2: Purchase a Fixed Number of Shares Monthly

Number of Shares Purchased Price per Share Monthly Investment Amount
28 $10 $280
28 $20 $560
28 $25 $700
28 $20 $560
28 $25 $700
140 $20 $2,800

Dollar-cost averaging can smooth out some of the short-term “bumpiness” of the financial markets. By investing regularly over a number of years (or decades), short-term downturns will have little effect on the long-term performance of your portfolio.

To read the previous post in this series click here

All investments are subject to risk, including the possible loss of the money you invest. Past performance does not guarantee future results. There is no guarantee that any particular asset allocation, or mix of funds, or any particular mutual fund, will meet your investment objectives or provide you with a given level of income.