Microsoft Corporation (MSFT), Best Buy Co., Inc. (BBY), Charles Schwab Corp (SCHW): Losing Money? Get Out of Your Own Way

The end result: Clipped wings, and how dollar cost averaging pays off

BBY data by YCharts

Despite the success of all three companies over the past 13 ½ years, they were incredibly overvalued (like many stocks) in 2000, leading to more than a decade of underperformance for investors who got in at the top. Simply put, dollar cost averaging can protect you from buying at exactly the wrong time.

Using dollar cost averaging would have meant outsized returns from two of the three. And a basket of the three combined outperforms both the market, and nets a decent return that most investors over this period would envy:

Ticker	DCA Return*	Total Return**	Performance vs. Total Return***
BBY	+29.3%	+32.45%	-3.15%
MSFT	+63.9%	-27.52%	+91.42%
SCHW	+90.9%	+6.48%	+84.42%
Average	+61.37%	+3.8%	+57.56%
S&P Total Return price change	+43.17%

*Based on equal amount invested on first trading day of each month since January 2000

**Includes dividends

**Source: Ycharts.com

If our theoretical investor had invested a combined $300 per month equally divided between the three, his total investment of $48,900 would be worth $78,909 today.

On the other side of the coin, if he’d invested this total sum in January 2000, it would be worth $50,758 today. That’s a losing game when inflation is added to the mix.

Foolish final thoughts

It’s important to remember that dollar cost averaging is just one tool investors can use. But the benefit – getting us out of our own way when it comes to buying at a good value – could make it the one tool that leads to your best returns. The numbers don’t lie: Most investors fail at buying at a good price. The numbers also tell us that dollar cost averaging will help your portfolio; but only if you can get out of your own way.

The article Losing Money? Get Out of Your Own Way originally appeared on Fool.com and is written by Jason Hall.

Jason Hall owns shares of Microsoft. The Motley Fool owns shares of Microsoft. Jason is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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