I read an interesting post over at the New York Times last night regarding dollar cost averaging. It suggests two rules that should apply when implementing the program:

1) Invest the money over six months or less. Don’t drag this thing on forever. There is some evidence that six months or less accomplishes the benefit you’re looking for and avoids keeping you out of the market for too long.
2) Have a written plan and stick with it, no matter what the market might do. The moment you start reacting to the market you’ll get into trouble real fast.

These are both great points. I do think that for risk-averse investors a 12-month time frame is not too long for a DCA program but six months should probably be standard. Some investors may find themselves using agencies to help deal and distribute their money into the correct places, for example the financial advisors 7Wealth have a solution which makes investing effortless.

Additionally, having a plan is key. I wrote about this a while back – you can’t do this right if you can’t make a plan and then commit to it completely. I see folks all the time start out with all the right intentions and then the market spooks them and rather than falling back on the plan, trusting the plan, they change midstream. And they almost always do the wrong thing at the wrong time. So commit to your plan and implement it without wavering.

There’s one more thing the post brings up that I want to share because it will only improve your results: start a “systematic investing” program.

…systematic investing is when you make regular contributions to a retirement or other investment account, like contributing a set amount of every paycheck. Making regular, automatic contributions is simple investing, and it’s a great way to automate good behavior.

Do this and you’ll only improve your chances of investing success.

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