Maybe lump-sum investing returns 8% on stock X in scenario Y, but only 6.8% via dollar-cost averaging. But, again, you waste time worrying about a percent here and there. It's the stock you select that matters.
An investment in Microsoft (MSFT) or Intel (INTC) five years ago didn't turn out quite as well as one in Apple (AAPL) or Amazon.com (AMZN) regardless of the method. It's easy to quantify the difference between 20% and 25% losses and 175% and 227% gains.
Focus on picking the best stocks. Period. That's what makes you a successful long-term investor -- stock picking. Not how you scale in or timing.
If you think Facebook is, to some extent, the next Apple or Amazon, buy a little bit as often as you can. Not as much as you can whenever you can, but a little as often as you can.
If this company reaches even half of its mobile monetization potential, it will be one of the top investments over the next five years. I said the same thing when the stock was getting beat up and outlets such as Barron's were setting $15 price targets. Endpoint -- I wouldn't mind dollar-cost averaging into a big winner. Sure, you'll buy more shares at higher prices if the thing moves in a straight line, but you'll still end up better off than the guy who went long MSFT or INTC. In my experience, on stocks that don't soar, averaging in over time almost always benefits. The best thing about it -- you look up one day and realize you accumulated a nice chunk of cash. When I signed as a full-time employee at TheStreet, I had to sell my stocks. I was pleasantly surprised with how things ended up in the names I had been dollar-cost averaging into for several years. Almost across the board, they performed better, just as well or ever so slightly below stocks I bought one time and forgot about. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV