Newbie here. This fundamental question has been nagging me as I begin my journey into buy and hold. Let’s say I buy a fund at $100 a share. Or a few different funds at varying prices.
I want to contribute/invest $1000 on a monthly basis.
Where do I dump this monthly contribution? Into the same funds?
The funds I’ve bought, the share prices go up and down. As the prices go up, for $1000 I can afford fewer shares. So my average price per share over time creeps upward. It’s like continually buying into Amazon after the profit is baked in - though not quite that extreme.
Or, do I keep looking for different funds that are at a bargain?
There’s some concept here I’m just not getting if anyone can explain it to me.
Why would I keep buying a fund if it’s price goes up to $175/ share, if I had previously got it for $100/share? I can only afford less and less of it, and my avg price goes up. Am I thinking wrong here? Thanks for any guidance.
Hi Christopher,
Yes, ideally you would contribute monthly into the same funds.
The reason why you would keep buying a fund when it goes up to $175/share is because one day it will be $300/share and beyond 
Obviously it’s preferable to buy all our shares at $100/share, but since that is not possible… it just shows the importance of investing early and often.
Hope that helps!
If I understand correctly and you are not trying to time the market, your question is akin to why continue to buy the same fund, let me see if my reasoning is something you can relate to.
For starters, I am a TDIF type of person, since I don’t like to have to rebalance my portfolio and I trust (for a lack of a better word) the fund management that Vanguard ( my broker) is providing me.
Since I was born in 1981 , my “work retirement” year would be between 2045 and 2050 , so I have two options of TDIF to buy, very similar, but they both have different timelines as how the internal conversion works.
Now, trying to answer your question, both TDIF’s would normally go up in price but can also go down, as we recently saw in the past few weeks. Using your example of having $1,000 a month to invest, U could do several things, either , buy whichever of the two is cheapest at the time of purchase, purchase $500 each or just purchase more on the one I have the most money invested in already, all these with the hopes of course that the one I purchase will continue to grow and when the time comes I need the money I will have had a good if not great growth inside the portfolio.
Maybe this was a long winded answer, or an attempt to answer, but you can always continue to buy what you see as “cheaper” that has potential to go up on value , or continue to put money into the fund you have chosen and maybe get even better dividends since you would have more money invested.
Thanks so much for the reply!
Ok gradually catching the drift, everything helps. Thanks very much!
Investment companies, brokers and even individuals who manage their investments entirely on their own, do a lot of research before they buy.
They don’t buy a stock just because they have bought it before. They buy stocks that have potential to grow, based on fundamental financial indicators.
If they own a stock that went from $100 in value to $175, they don’t say lets buy more. They evaluate whether or not the company who’s stock they bought is at the end of their growth spurt, or whether that company has a good chance of growing even more.
If the same stock dropped from $100/share to $50, they wouldn’t automatically sell out. They would again evaluate the fundamentals of the underlying company, and if prospects for recovery of value and then additional growth were good, they would hold what they have and maybe buy more.
If you have the time to learn, you can do it all yourself. If you don’t, you either need a good broker, or you need to go with a packaged investment plan, aka VanGuard, Fidelity, Personal Capital, Betterment, and on and on.
Everyone wants to manage your money for you. Even if you never expect to be making your own investment decisions, I would encourage you to go with broker or investment company that answers all of your questions and fully supports you being an informed investor.
Etc.