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Author: wrjohnston91283 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: $-Cost Averaging/Time Diversification: Myths Date: 3/23/2012 9:30 PM
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As other's have pointed out, the practice of purchasing the same dollar amount at regular intervals helps in several ways
1) It helps to force savings. With automatic investing (such as a 401k plan), a set amount is taking each paycheck and invested. If paid in cash, many people would not have the discipline to invest this money.
2) It takes the guesswork out of market timing. Most people can't time the market. Even experiences investors often can't; during the crash of 2008, many people stopped contributing to their 401ks, planning on getting back in when the market turned around, however many missed the bottom. In 2010 it was a big deal that the market was "flat" between 2000 and 2010. A quick calculation shows between 1/31/2000 and 1/19/2010 the S&P 500 dropped around 10%; adjusted for dividends. Someone investing the same amount each week would have been up 5%. If you were able to save your cash and time the two bottoms perfectly, you would have been up 45%, yet if on the other extreme if you bought at each peak you would be down 42%.
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