Building Wealth With Dollar-Cost Averaging

One of the most important strategies for the average investor is to stick to long-term goals and ignore short-term swings. It’s a proven strategy, but it’s easier said than done. Why? Because, deep down, every investor wants to be in the market when it’s going up and, on the sidelines, when it’s going down.

Enduring Market Turbulence Isn’t Easy

The fallacy of successful market timing is well known, and informed investors generally resist the temptation. Which leads us back to the question: What’s an investor to do?

There’s no wondrous solution to investing in markets that are unknowable in the short run. There is, however, an uncomplicated (and mostly unexciting) way to participate in the market’s long-term growth opportunities. It’s called dollar-cost averaging and it may be one of the smartest ways to build wealth over time.

Unlike market timing, where an investor guesses (emphasis on guesses) the most opportune time to buy or sell, dollar-cost averaging puts a fixed amount of money to work at predetermined intervals, typically monthly or bi-weekly, regardless of market conditions.

We understand that it’s difficult for most folks to invest in a falling market. It’s hard, behaviorally, to go against a downward trend. But we also know how investors regret missing out on what proved, in hindsight, to be a great buying opportunity.

Dollar-cost averaging works because it may reduce investor anxiety, help avoid trying to time the market, and can provide a predictable, regimented way to continuously grow an investment portfolio. 

Putting Dollar-Cost Averaging To Work

Backed by a wealth of historical data showing how markets rise over time, dollar-cost averaging is especially well suited for high-quality mutual funds.

Assume, for example, your investor wants to put money to work in a fast-changing basket of innovative companies like those in the NASDAQ 100. For simplicity, let’s suppose you’re only buying shares of the Nasdaq-100 Index Fund (Ticker: NASDX). Rather than invest the full amount in a lump sum, you suggest he or she set up a dollar-cost average plan. There are a few simple steps to follow:

1. Determine how much money to invest.
2. Determine how often to invest --daily, weekly, monthly, or any interval the investor chooses.
3. Determine the dollar amount invested at each interval. A lump sum can be divided by the number of periods.
4. Stick with the plan, no matter what.

There’s No Substitute For A Great Investment

Put in practice, dollar-cost averaging a fixed amount into a fund like NASDX may help investors stick to their plans without making emotional decisions based on market activity. By removing consideration as to what the market is doing on a particular day, the strategy may effectively reduce the fear of investing – or not investing -- at the wrong time.

Like any investment strategy, there are times dollar-cost averaging works better than others. But given its ability to remove some of the emotional barriers that come with growth investing, the strategy attempts to give an investor a better chance to capture the potential growth that comes from owning innovative companies.

The Nasdaq-100 Index Fund is one way to own major innovative companies -- iconic names like Microsoft, Apple, NVIDIA, Amazon, and Tesla. Built to track the Nasdaq 100, NASDX has received an Overall Morningstar Rating of 5 stars among 1,125 Large Growth funds, based on risk-adjusted returns, as of 9/30/23. With a 20-year track history, NASDX has a demonstrable record of success toward achieving its objective.

Important Information

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Dollar cost averaging does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.

An investment in the Fund involves risk, including possible loss of principal. Fund information is not intended to represent future portfolio composition. Portfolio holdings are subject to change and should not be considered a recommendation to buy individual securities.

The Fund invests in the largest non-financial companies that are traded on the Nasdaq Stock Market. They are currently concentrated in the technology sector which has been among the volatile sectors of the U.S. stock market. During a declining stock market, this fund would lose money. It would potentially lose more money than other large cap funds.

Nasdaq^®, Nasdaq-100^® and Nasdaq-100 Index^® are trade or service marks of The Nasdaq Stock Market, Inc. which with its affiliates are the “Corporations”) and are licensed for use by the Fund. The Fund has not been passed on by the Corporations as to their legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Fund.

Shelton Funds are distributed by RFS Partners, a member of FINRA and affiliate of Shelton Capital Management.

Investors should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about the fund. To obtain a prospectus, visit www.sheltoncap.com or call (800) 955-9988. A prospectus should be read carefully before investing.

INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.