I Dollar Cost Average into My Investments a Bit Different

Due to the nature of my finances and company contributions to my savings plan and pensions I do not dollar cost average into my dividend stocks. My wife and I are fortunate enough that she is able to stay home to look after the kids while I am at work. This has meant some sacrifices, and one of which is that I do not put in any additional money from my paycheck into any investment assets. Our ’saving’ grace so to speak is that I work for a company that has a very good pension and savings plan that provides me with a high level of additional money to invest with. I have provided descriptions of these accounts in previous posts. To buy my dividend stocks I have had to be strategic about this company provided money. Here is how it works.

First off, I do dollar cost average (for a definition of DCA - see The Digerati Life) into the pension funds available through my pension fund. Each month I contribute 2% of my earnings and the company gives me 4% and these go into specific pension funds of my choice. I choose between a Canadian equity, U.S. Equity, International Equity, and/or, Bond fund. The amount I allocate to these funds depends solely on my asset allocation requirements. For example, right now I am light in my fixed income and international equity allocation so my contributions are directed to these respective funds. Once my asset allocation is correct, I will alter where my contributions are placed. Therefore, I am doing a modified dollar cost averaging strategy as the money is automatically invested every month, however it is not totally passive as I alter where the money is invested.

I also dollar cost average into our company stock, however it is this money where I typically get the funds to purchase my dividend investments. Each month I contribute money to buy company stock and receive a match for doing that. As one of The Dividend Guy Code I live by is to try to ensure that no one stock make up more than 10% of any one holding, I often need to sell this company stock from time to time which provides me with cash for other assets, such as dividend stocks. Therefore, I do dollar cost average into this company stock but also sell it. With this money, I do not dollar cost average but rather I invest it in a lump sum into dividend stocks or other assets as dictated by my asset allocation. Investing this in a lump sum is the preferred method based on research so I choose to do it this way.

In summary, just because of the nature of my situation, I do dollar cost average but have had to make some modifications to ensure that my asset allocation is in line and to allow me to purchase dividend growth stocks. What things have you had to do to get the benefits of dollar cost averaging?

(Photo Credit: mokra)