Let's Hear it For the Bears

Most investors who haven’t already given up on the stock market are hoping that the bear will soon loosen its grip and that stocks will return to decent gains. But if you’re putting your money into a retirement fund on a regular basis and you’re not planning to retire in the next 5 years or so, rooting (just a little bit) for the bears makes some economic sense.

Investing a fixed amount of cash at regular intervals is what market mavens call “dollar cost averaging.” When the share price is high, your regular investment buys fewer shares. But when the share prices drop, as they have for most of this year, your money buys more shares, bulking up your portfolio and providing you with even greater potential rewards when the market finally turns around. And if your timeframe between now and retirement is somewhere between 10 and 30 years, a market recovery is almost a guarantee.

Many brokerage houses and mutual funds will let you set up an automatic investment plan that takes money out of your checking account every month and puts it into a stock or fund that you choose. You can also opt for a program like Sharebuilder, which lets you specify the time interval for the investment as well as the amount to be invested. Sharebuilder also lets you choose from different types of accounts, such as a regular IRA, a Roth IRA, or an Educational Savings Account, where you want the assets to be held.