How much VOO has made for me since last year, Dollar-Cost Averaging explained

A dollar-cost averaging investment I created for this newsletter.

Photo by Stephen Dawson on Unsplash

Introduction

I’ve mentioned before that I’ve always recommended investing in ETFs and index funds to friends and family who aren’t experienced investors.

Last month I went over which ETFs I invest in as well as the difference between index funds and ETFs, you can see that issue at this link.

In most of my accounts, I keep one base fund or stock that tracks the total market or the S&P 500. In my ETF account, my main holding is the Vanguard Total Stock Market Index Fund (VTI). However last year, I also bought the Vanguard 500 Index Fund (VOO), even though it’s very similar to VTI, and this is why.

I follow a lot of great finance bloggers and YouTubers. One thing I noticed is that so many of them tell you what you COULD have made if you started investing X years ago in the S&P 500. In the summer of 2022, I planned on starting a YouTube channel (which I eventually did, you can see an episode below, but that morphed into this newsletter) and one of the things I wanted to do was show a real-world example of dollar-cost averaging into an index fund, the exact amount I was putting in, how much I’m investing into it every week, and monthly updates of where that investment is at. I never got to create a video on it, but now’s as good a time as any with this newsletter, especially with the S&P 500 being down since the 2023 high in July when it closed at 4,588.96 (it closed today at 4,373.63, so down 4.7% from the July high).

A quick reminder that this is not financial advice, just myself sharing my investments, stocks, index fund strategies, what I'm buying, and where I plan to take those investments. Everyone’s financial goals are different. No financial decisions should be made solely on this newsletter, which for for informational and entertainment purposes only, and is not intended to be a substitute for advice from a professional financial advisor or qualified expert.

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Dollar-Cost Averaging Explained

Dollar-cost averaging is a strategy that involves investing the same amount of money into a particular investment on a regular schedule, regardless of price. I have been dollar-cost averaging for decades.

So for instance, in this case, I’m buying $750 of VOO every week. My daughter (you can see how I got her started with investing here) is dollar-cost averaging by investing $50 each month into the Fidelity 500 Index Fund (FXAIX), which tracks the S&P 500. I dollar-cost average in all of my ETFs and in most of my investment accounts (retirement, 529, mutual funds, ETFs, etc.). I basically set it up and never think about it.

Buying VOO

For VOO, I first made an initial investment of $5000 on June 16, 2002. I had planned to create the first video and then start the weekly investment. When the video wasn’t happening, I bought $500 on July 8th and then planned to do the video, but it didn’t happen again so I just went ahead and set up the weekly investment of $500 on July 21, 2002.

There was a glitch where the automatic investment didn’t go through on November 10, 2022, so there is one week missing from my investments. Starting on May 11, 2023, I changed the weekly amount to $750.

I’ve pretty much left it alone except for one exception. On August 7, 2023, I switched the bank account funding these purchases and accidentally set it to $2000. The week after, it was back to normal at $750.

Performance

It’s only been a little over a year, but as of today (Tuesday, October 16, 2023), the total value is $48,860.18. It has gained $3,103.09 (6.7%), plus I’ve received about $550 in dividends (which have been reinvested, which is why the total value isn’t a round number), so a total gain of over $3,650.

I revealed my “4800 strategy” in the last newsletter, and this investment should have a nice gain when the S&P 500 hits 4,800, whether it’s this year, next year, or whenever. I use the old saying, “It’s not timing the market, it’s time in the market”. And for me, every time I’m purchasing VOO before the S&P 500 hits 4,800, I’m buying it on sale. When the S&P 500 does reach 4,800, I’ll set a new benchmark.

Conclusion

I’ll do an update on how this investment is doing at the end of the year. Please let me know your thoughts on this newsletter and submit any feedback. You can follow me on Twitter at @TheRajGiri or on Threads at @RealRajGiri . If you haven’t already, please subscribe below: