The Worst “Timing” Ever

I have been using automatic purchases plans to buy most of my mutual funds for years. The date that I chose for making the monthly purchase is the 5th of the month. The reasons for selecting this date are:

  1. I don’t want to buy funds at the end of the month because that’s the time when mutual funds are likely to make dividend distributions. Buying at the end of the month increases the possibility of buying-the-dividend;
  2. Since I pay most of my bills at the beginning of the month, it makes evaluating our saving goal at little easier to have everything done, including investment, at the middle of the month.

By using the automatic service, I am not trying to time the market. Instead, I buy shares whether the market goes up or come down (dollar-cost averaging). This method has served us quite well over the years and I am very happy with the set-and-forget approach.

The Dow JonesThen today, after seeing what happened in the markets in the past two days, I wish that I had bought those shares today, when the Dow dropped nearly 400 points, than yesterday when the index went the opposite direction more than 200 points! The 600-point swing in two days in the worst since I started the automatic service.

So what caused the bloodshed?

For one we knew what happened in the job market last month. The latest government report showed that U.S. employers cut 48K jobs in May, the fifth consecutive month that the economy failed to create jobs. Even more worrisome is the unemployment rate, jumping 0.5% in a month to 5.50%, the highest level in more than three years.

Another thing we can blame is the price of crude oil, which surged $11, the biggest gain in a single day ever, to a new all time high of $139.12 a barrel before settling at $138.54. Events fueling the oil price include:

  • European Central Bank president indicates that the central bank is ready to increase interest rates in the Euro zone to battle inflation, making the U.S. dollar less appealing to investors.
  • An Israeli official said attacking Iran, world’s second largest oil exporter, is unavoidable if Iran continues its atomic activities, rising fears of disruptions in oil supply.

Actually, I noticed this morning that the gas price at my local gas station dropped 2 cents from two days ago when I filled up my car. Don’t expect that trend to continue though!

Gold priceAnd as the oil price jumps, so does gold.

The precious, which has been quite volatile recently, rose more than $23 today to reclaim the $900 mark. Gold price has dropped to below $870 an ounce less than a month ago as the U.S. dollar rebounded against the Euro. Now that rebound seems to be over.

While most of my stocks/funds were down sharply today(Visa (V): -$3.59, China Life (LFC): -$3.04, Research in Motion (RIMM): -$4.18, just to name a few), there is a sole bright spot: Tockqueville Gold Fund (TGLDX) with a gain of $0.52 :)

And today I also bought $200 of Dodge & Cox International Fund (DOGFX), which dropped $1.42 a share. I wish I bought all my shares today :D

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9 Responses to “The Worst “Timing” Ever”

  1. Kristin |  Jun 07, 2008 at 1:31 pm

    You have described one of the big trade offs concerning Automatic investing plans. Set up and forget is great, until the market moves in wild gyrations.

    I was buying once a month on the 21st, but recently decided to change that and spread out the purchases to every week on Friday. So, I lucked out this past week and bought when the market was down.

  2. No Debt Plan |  Jun 08, 2008 at 9:17 pm

    You’ve got to keep the long term view. I bought on I think Monday after trading (Vanguard mutual fund does after close) this past week and was excited because Monday was a down day. Then we got hammered.

    But, in 30 years, hopefully it won’t matter too much.