When Markets Swing, Stay the Course

The Hook: A Wild Month on Wall Street

If you've checked your 401(k) or brokerage account lately, you might have felt a little seasick.

Over the past month, the markets have been on a roller coaster. The S&P 500 started the period around 6,592 on March 25, then dropped sharply to a low of 6,344 by March 31—a decline of roughly 3.8% in under a week. The Nasdaq saw even more dramatic swings, trading as low as 16,960 over the past year before climbing back toward 24,837 by late April.

That's a lot of movement. And if you're an everyday investor—someone saving for retirement, a child's college fund, or just building wealth for the future—those swings can feel personal. They can make you want to do something. Sell. Pause contributions. Wait for "calmer waters."

Here's the thing: that impulse is exactly why most individual investors underperform the market.

The good news? There's a simple, proven strategy that takes the emotion out of investing and turns volatility into an advantage. It's called dollar-cost averaging (DCA), and it's one of the most powerful tools available to regular families in the Triangle and beyond.

What Is Dollar-Cost Averaging?

Dollar-cost averaging is the practice of investing a fixed amount of money at regular intervals—regardless of what the market is doing.

Instead of trying to time the market (buying when you think prices are low, selling when you think they're high), you invest the same amount every month, every paycheck, or on whatever schedule you've set. When prices are high, your fixed dollar amount buys fewer shares. When prices are low, that same fixed amount buys more shares.

Over time, this smooths out your average purchase price. You don't need to predict the bottom. You don't need to catch the top. You just keep showing up.

Example: You invest $500 per month into an S&P 500 index fund.

• Month 1: Fund price = $100 → you buy 5 shares
• Month 2: Fund price = $80 (market dips) → you buy 6.25 shares
• Month 3: Fund price = $125 (market recovers) → you buy 4 shares

Total invested: $1,500
Total shares owned: 15.25
Average cost per share: $98.36

Notice: even though the price went up and down, your average cost ($98.36) is lower than the average of the three prices ($101.67). That's DCA working for you.

Why DCA Works—Especially During Volatile Times

1. It Removes Emotion from the Equation

Research in behavioral finance shows that investors consistently make poor decisions when markets get choppy. A 1995 study by Statman identified several behavioral reasons people struggle with lump-sum investing: loss aversion (the pain of losing feels worse than the pleasure of gaining), regret avoidance (we'd rather not make a decision than make the wrong one), and cognitive errors caused by recent market trends.

DCA is essentially an automation strategy. Once you set it up, you don't have to decide whether "now is a good time to invest." The decision is already made. This is why 401(k) plans are so effective—they're DCA machines that run in the background while you focus on living your life.

2. It Reduces Risk Without Sacrificing Long-Term Growth

A 2005 study by Brennan, Li, and Torous at UCLA found that when stock prices exhibit mean reversion (tendencies to bounce back after declines), DCA strategies can actually outperform lump-sum investing—especially for investors adding to an already diversified portfolio.

More importantly, a 2015 analysis in the Journal of Financial Planning by Cho and Kuvvet confirmed that DCA lowers the probability of significant losses at any point during an investment horizon. In plain English: you're less likely to invest everything right before a crash.

3. It Turns Volatility Into an Opportunity

This is the counterintuitive part. Most people hate volatility. But if you're a regular investor using DCA, volatility is your friend.

When the market drops 10%, your next contribution buys 10% more shares. When it drops 20%, you buy 20% more. Those extra shares compound over decades. The investors who built real wealth didn't panic during the 2008 crash or the March 2020 pandemic drop—they kept buying, often at generational lows.

The S&P 500's recent dip to ~6,344 and subsequent rebound to ~7,165 is a perfect micro-example. Investors who paused contributions during the dip missed buying at lower prices. Those who stuck with DCA automatically bought more shares when they were cheaper—and are now sitting on gains as the market recovers.

The Data: What History Actually Shows

Let's look at a concrete example using the recent market action.

Date	S&P 500 Close	Hypothetical $500 Investment	Shares Purchased
Mar 25	6,592	$500	0.0758
Apr 1	6,575	$500	0.0760
Apr 7	6,617	$500	0.0756
Apr 14	6,967	$500	0.0718
Apr 21	7,064	$500	0.0708
Apr 24	7,165	$500	0.0698

Total invested: $3,000
Total shares (normalized): 0.4398
Average cost per "unit": 6,821

Compare that to someone who invested the full $3,000 on March 25 at 6,592: they would have bought 0.4551 units—better in this case because the market went up. But if the market had dropped after March 25, the lump-sum investor would have been worse off. DCA is insurance against bad timing.

Historical studies (Williams & Bacon, 1993, analyzing 1926–1991 data) show that lump-sum investing outperforms DCA about two-thirds of the time—because markets generally trend upward. But that other one-third? Those are the periods right before major corrections, crashes, or extended bear markets. DCA protects you precisely when protection matters most.

The Behavioral Edge

Here's what the academic research consistently finds: the best strategy is the one you can actually stick with.

Leggio and Lien (2001) tested whether behavioral biases alone explain DCA's popularity. They found that while lump-sum investing often wins on pure returns, DCA's real advantage is psychological. It reduces responsibility and regret—you're not "the person who invested everything right before the crash." You're "the person who kept investing steadily through good times and bad."

For families in Raleigh, Durham, Chapel Hill, and across the Triangle, this matters. You're not managing a hedge fund. You're building a life. You have jobs, kids, mortgages, and enough to worry about without adding "should I invest this month?" to the list.

The Clear Takeaway

Market volatility isn't a bug—it's a feature of how markets work. The S&P 500's 11%+ swing from its recent low to its current level near 7,165 is completely normal over the long arc of investing history.

The investors who win aren't the ones who predict every dip and rally. They're the ones who:

If your current strategy already involves automatic contributions to a 401(k), IRA, or taxable brokerage account: you're already doing this right. The best move during volatile periods is often no move at all—just keep the autopilot on.