A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

ILLUSTRATION OF DOLLAR-COST AVERAGING
WITH VANGUARD’S 500 INDEX FUND
Year Ended
December 31
Total Cost of
Cumulative
Investments
Total Value of
Shares Acquired
1978
$1,600.00
$1,699.26
1979
2,800.00
3,273.66
1980
4,000.00
5,755.25
1981
5,200.00
6,630.16
1982
6,400.00
9,487.21
1983
7,600.00
12,783.16
1984
8,800.00
14,863.80
1985
10,000.00
20,905.05
1986
11,200.00
25,934.97
1987
12,400.00
28,221.32
1988
13,600.00
34,079.49
1989
14,800.00
46,126.09

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1990
16,000.00
45,803.07
1991
17,200.00
61,009.59
1992
18,400.00
66,816.94
1993
19,600.00
74,687.08
1994
20,800.00
76,779.25
1995
22,000.00
106,944.33
1996
23,200.00
132,767.97
1997
24,400.00
178,217.41
1998
25,600.00
230,619.41
1999
26,800.00
280,564.59
2000
28,000.00
256,271.48
2001
29,200.00
226,622.13
2002
30,400.00
177,503.25
2003
31,600.00
229,523.84
2004
32,800.00
255,479.22
2005
34,000.00
268,932.69
2006
35,200.00
312,317.65
2007
36,400.00
330,350.05

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2008
37,600.00
208,940.55
2009
38,800.00
265,755.99
Of course, no one can be sure that the next forty years will
provide the same returns as past periods. But the table does
illustrate the tremendous potential gains possible from
consistently following a dollar-cost averaging program. But
remember, because there is a long-term uptrend in common-
stock prices, this technique is not necessarily appropriate if
you need to invest a lump sum such as a bequest.
If possible, keep a small reserve (in a money fund) to take
advantage of market declines and buy a few extra shares if the
market is down sharply. I’m not suggesting for a minute that
you try to forecast the market. However, it’s usually a good
time to buy after the market has fallen out of bed. Just as
hope and greed can sometimes feed on themselves to produce
speculative bubbles, so do pessimism and despair react to
produce market panics. The greatest market panics are just as
unfounded as the most pathological speculative explosions.
For the stock market as a whole (not for individual stocks),
Newton’s law has always worked in reverse: What goes

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down has come back up.