Of course, the tendency to read the tea leaves of your holdings is tempting, especially when market upswings seem predictable. For example, enrolling automatically in your company’s 401(k) plan means the monthly or bi-weekly investments tend to coincide with the deductions from your paycheck. Although millions of employees are paid on a similar schedule of the beginning, middle and end of the month or just once a month, the timing doesn’t -- as many assume -- affect the returns of your retirement portfolio, said Jeff Sica, CIO of Circle Squared Alternative Investments in Morristown, N.J.
“The volume from having employees who have their paychecks deducted automatically into a retirement account is a microcosm of the entire volume and is not as much as people think,” he said “It is not enough money to move the market and less than 10%.”
Institutional players such as mutual funds, pension funds and hedge funds move the market because of the immense volume being invested, so retail investors should be more concerned about how long they are investing in the market and not divesting assets too soon. The number of times you invest each year is not relevant either, Sica said.
“Dollar cost averaging works over the duration if you are investing consistently,” he said. “It doesn’t matter if you invest once a week, monthly or quarterly. It’s the duration of the time you stay in the market that benefits you the most.”