I confess, my 401k portfolio was invested too aggressively in 2008.  I’m still down big as the chart shows below: (Ouch, yes it hurt me just to look at it)

Yes, the cumulative rate-of-return from the beginning of 2008 to the end of 2009 is -18.6%.  Looks pretty bleak for me huh…  So what did I do in 2008-2009 to rectify the problem?  I increased my contribution rate to the maximum percentage that I’m allowed to.  So as the market was going down, I was hoping to take advantage of a concept call dollar-cost averaging.

What is Dollar-cost averaging?  Well if you allocate a constant amount of money for buying a security (stocks, bonds, mutual funds, ETFs… etc) in a measured time period (for example, quarterly), it enables you to buy more shares in a bear market (or less in a bull market) of that security.  So when the market is declining, you buy more shares of a security, and that’s what I’ve been banking on.  Now that we’ve had a decent run-up in the valuation of the stock market, I would be more hesitant now…

Let’s me give example.  Say, I buy $100 dollars worth of a stock (let say BAC) every once a quarter (random purchase date)…

So that means that during the following time periods I bought the following shares:

Amount		Price of the	Amout of	Cumulative	Value of
Invested	Date	BAC Stock	Shares	Shares	Shares
100	12/03/08	34.48	2.9	2.9	99.99
100	01/23/09	6.24	16.03	18.93	118.1
100	05/01/09	8.7	11.49	30.42	264.65
100	10/30/09	14.58	6.86	37.28	543.52
400	01/02/10	15.06	37.28	37.28	561.42

This would be about a 40% return on my investment (If I did this, which I didn’t of course…, but it’s a good example).

So, yes I’m not happy that I’m still down, but taking everything as a whole, I’m doing okay, even if I am still down from my portfolio high at the end of 2007!