You may be wondering if now is a good time to invest. But waiting for the right time to get into the market could cause you to miss out on significant gains.
Dollar cost averaging is a strategy in which you invest a consistent amount on a recurring basis (i.e., monthly, quarterly, etc.) regardless of market conditions. It can be an effective way to systematically build your wealth.
The table below contrasts the results of three different investors who invested $10,000 per year in the S&P 500 Index.
All three investors enjoyed significant gains because time in the market matters much more than timing the market.
Lucky, Unlucky, and Systematic Investors All Fared Well by Investing Regularly
| Unlucky Investor Invested Each Year at the Market High |
Systematic Investor Invested on the First Day of Each Year |
Lucky Investor Invested Each Year at the Market Low |
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| Date | Cumulative Investment | Value | Date | Cumulative Investment | Value | Date | Cumulative Investment | Value |
| 3/24/2000 | $10,000 | $10,000 | 1/3/2000 | $10,000 | $10,000 | 12/20/2000 | $10,000 | $10,000 |
| 1/30/2001 | $20,000 | $19,079 | 1/2/2001 | $20,000 | $19,177 | 9/21/2001 | $20,000 | $17,710 |
| 1/4/2002 | $30,000 | $26,491 | 1/2/2002 | $30,000 | $26,898 | 10/9/2002 | $30,000 | $24,476 |
| 12/31/2003 | $40,000 | $35,999 | 1/2/2003 | $40,000 | $30,953 | 3/11/2003 | $40,000 | $35,431 |
| 12/30/2004 | $50,000 | $49,970 | 1/2/2004 | $50,000 | $49,832 | 8/12/2004 | $50,000 | $58,217 |
| 12/14/2005 | $60,000 | $63,338 | 1/3/2005 | $60,000 | $64,807 | 4/20/2005 | $60,000 | $73,036 |
| 12/15/2006 | $70,000 | $82,382 | 1/2/2006 | $70,000 | $78,546 | 6/13/2006 | $70,000 | $90,314 |
| 10/9/2007 | $80,000 | $101,713 | 1/2/2007 | $80,000 | $100,952 | 3/5/2007 | $80,000 | $112,816 |
| 1/2/2008 | $90,000 | $105,860 | 1/2/2008 | $90,000 | $116,498 | 11/20/2008 | $90,000 | $74,018 |
| 12/28/2009 | $100,000 | $95,281 | 1/2/2009 | $100,000 | $83,396 | 3/9/2009 | $100,000 | $77,205 |
| 12/29/2010 | $110,000 | $118,612 | 1/4/2010 | $110,000 | $115,466 | 7/2/2010 | $110,000 | $129,989 |
| 4/29/2011 | $120,000 | $139,137 | 1/3/2011 | $120,000 | $144,368 | 10/3/2011 | $120,000 | $153,287 |
| 9/14/2012 | $130,000 | $164,245 | 1/2/2012 | $130,000 | $155,762 | 1/2/2012 | $130,000 | $186,410 |
| 12/31/2013 | $140,000 | $223,044 | 1/2/2013 | $140,000 | $190,689 | 1/2/2013 | $140,000 | $226,242 |
| 12/29/2014 | $150,000 | $267,444 | 1/2/2014 | $150,000 | $262,450 | 2/3/2014 | $150,000 | $292,560 |
| 5/21/2015 | $160,000 | $284,848 | 1/2/2015 | $160,000 | $308,375 | 8/25/2015 | $160,000 | $334,110 |
| 12/13/2016 | $170,000 | $324,178 | 1/4/2016 | $170,000 | $322,642 | 2/11/2016 | $170,000 | $340,619 |
| 12/18/2017 | $180,000 | $401,768 | 1/2/2017 | $180,000 | $371,230 | 1/2/2017 | $180,000 | $435,023 |
| 9/20/2018 | $190,000 | $454,106 | 1/2/2018 | $190,000 | $462,276 | 12/24/2018 | $190,000 | $485,082 |
| 12/27/2019 | $200,000 | $524,943 | 1/2/2019 | $200,000 | $452,008 | 1/3/2019 | $200,000 | $515,391 |
| 12/31/2019 | $523,547 | 12/31/2019 | $594,329 | 12/31/2019 | $693,806 | |||
| Average Annual Return | 14.10% | 14.59% | 15.18% | |||||
Data Sources: Morningstar and Hartford Funds, 3/20. Past performance does not guarantee future results. Assumes reinvestment of dividends and capital gains and no taxes or transaction costs. The S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks. The Index is unmanaged and not available for direct investment. For illustrative purposes only. Dollar-cost averaging neither assures a profit nor protects against a loss. Because systematic investing involves continuous investing regardless of fluctuating price levels, you should carefully consider your financial ability to continue investing through periods of fluctuating prices.
Talk to your financial advisor today about setting up a systematic investing strategy to help you build long-term wealth.
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