I've been dollar-cost averaging into the S&P 500 for 3 years: is it okay to keep going like this?
For three years, I've just been buying an S&P 500 index ETF with 500,000 won a month. I don't have any talent for picking stocks, and reading the news makes me anxious, so I just set up an automatic transfer.
As for returns... I've found it's better for my mental health not to open the account. I'm curious whether everyone invests like this, or whether you also mix in bonds or other assets.
9 answers
Do you have a source? I’m curious about the rationale for mixing in bonds.
Well, with three years of contributions, you've only experienced a bull market. Once you get a taste of a bear market, your mindset will probably waver. It just feels right because things are going well right now. Since you didn't mention your age, retirement timeline, or whether you have an emergency fund, it's hard to give specific advice.
Same here. But I set aside a separate emergency fund covering three months' worth of automatic transfers. Without it, I’d have no choice but to sell my index funds whenever an expense comes up.
Oh, I didn't know that.
Consistently putting in 500k won every month is impressive in itself—I’ll admit that.
I don’t agree. If you’ve only been investing in the S&P 500 for 3 years, that’s not really that long, and since it’s mostly US large caps, it may feel diversified but it isn’t fully diversified. Mixing in some emerging markets or bonds can reduce volatility a bit and help with keeping your emotions in check. But adjusting that won’t necessarily make returns significantly better, so whatever you’re comfortable with is best.
This is off-topic from the question, but I really relate to the whole not-checking-your-account thing... I made a rule to check only once a month, but even that's hard lol
This is so true lol, the answer is not checking your account.
Three years is plenty to show that this is a well-tested approach. I’ve been doing the same thing for seven years, and at one point I thought about selling during a -20% stretch, but I just left it alone and it eventually recovered. Looking back now, setting up automatic transfers was the best thing I did. That said, there’s talk that you should increase your bond allocation as you get older, so once you’re past 40, it might be worth considering.