Dollar-cost averaging lets you benefit from stock market declines


Are you worried that this stock market will nose-dive? "Systematic investing -- putting in a fixed amount of money every month -- may solve that problem," notes Worth magazine, January. "When you invest systematically, you don't base investment decisions on day-to-day ups and downs in Wall Street.

"It's called 'dollar-cost averaging.' When the market goes down, your fixed monthly investment buys more shares. It's like bargain shopping. If you were willing to pay $10 for a share of stock, why wouldn't you pay $6 a few months later?"

ANOTHER WAY: "Before mailing your year-end bonus to a mutual fund run by last year's gurus, be careful," warns Business Week, Jan. 18. "Over the past five years, fewer than 5 percent of all stock mutual fund managers beat the S&P; 500-stock index.

"Instead, try an index fund. Over time, index funds -- they mechanically replicate the S&P; blue-chip index -- outshone 55 percent of their actively managed rivals. If you compound index funds' returns over 10 years, they beat 80 percent of their competition."

LOCAL HONORS: T. Rowe Price Associates Inc. stock is listed under "Rising Stars" in S&P; Outlook, Jan. 6. "Above-average operating margin and return on equity, coupled with favorable demographic trends, should lead to strong earnings for this Baltimore-based mutual fund manager."

MARKET WATCH: "While Internet stocks soared to the stratosphere, the majority of stocks made no progress in December and early January. This signals impending trouble." (Cabot Market Letter.)

"Stocks will now be supported by another potential Fed easing, strong seasonal flows and fourth-quarter earnings close to expectations." (Market Trend Investors, in this week's Barron's.)

"A selling climax is likely to come upon a flirtation with Dow Jones 10,000. Selling 'into' a rally now makes sense because it's hard to chase a falling market down -- and find any bidders." (Mamis Report.)

Pub Date: 1/13/99

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad