<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=314834185700910&amp;ev=PageView&amp;noscript=1">

Dollar-Cost Averaging May Help American Family Employees Mitigate the Impact of Market Volatility

image-table

'Dollar-cost averaging provides American Family employees a strategic way to navigate market fluctuations, ensuring their retirement savings grow steadily over time by avoiding the temptation to time the market,' says (Advisor Name), a representative of The Retirement Group, a division of Wealth Enhancement Group.

'As market volatility can be unsettling, American Family employees can benefit from dollar-cost averaging, which reduces emotional decision-making and helps maintain consistent investment contributions for long-term financial goals,' advises (Advisor Name), a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

  • 1. The concept and benefits of dollar-cost averaging as an investment strategy.

  • 3. How dollar-cost averaging can help mitigate market volatility and reduce emotional bias.

  • 4. The potential limitations of dollar-cost averaging and considerations for its application.

Introduction:

Dollar-cost averaging is an investment strategy that can mitigate market volatility and reduce the risks associated with market timing. This strategy entails investing equal quantities at regular intervals, irrespective of market fluctuations. By doing so, investors may be able to purchase more shares at low prices and fewer shares at high prices. American Family investors may find this article's discussion of dollar-cost averaging, its potential benefits and drawbacks, and its relevance to long-term investing objectives to be valuable.

Understanding Dollar-Cost Averaging:

Dollar-cost averaging enables investors to invest a fixed quantity of money regularly over a period of time, as opposed to investing a lump sum. Employees, including American Family professionals, who are uncertain about the optimal time to invest or who wish to mitigate the impact of short-term market fluctuations may find this strategy particularly useful.

Mitigating Volatility:

Dollar-cost averaging has the potential to reduce the impact of market volatility on investment outcomes, which is one of its primary advantages. By investing at regular intervals, investors can take advantage of market downturns, as lower prices allow them to purchase more shares for the same investment amount. This can result in a reduced average cost per share over time. If, on the other hand, a single-sum investment is made at the market's peak, any subsequent decline could result in substantial paper losses.

A Hypothetical Example:

Consider a hypothetical circumstance to illustrate the concept. Assume that an investor has $5,000 to invest and has chosen a stock to purchase. Instead of investing a single sum, they choose to invest $1,000 per month for five months. The table below illustrates how this strategy may play out if stock prices fluctuate:

Date Amount Stock Price Number of Shares
15 January $1,000 $20 50
15 February $1,000 $21 47.61
15 March $1,000 $18 55.55
15 April $1,000 $19 52.63
15 May $1,000 $21 47.62

The investor would have acquired 253.4 shares at an average price of $19.73 per share by the end of the investment period. At the initial price of $20 per share, only 250 shares could have been purchased with a single-sum investment. This example illustrates how dollar-cost averaging may result in a lower average purchase price.

Risk Management and Emotional Bias:

Additionally, dollar-cost averaging can mitigate the influence of emotional biases on investment decisions. Attempting to time the market precisely is difficult and frequently yields suboptimal results. By adhering to a disciplined investment plan, investors can avoid making fear- or greed-based rash decisions. This approach promotes consistency and reduces the temptation to react to short-term market fluctuations.

Considerations and Limitations:

Although dollar-cost averaging has prospective benefits, it is important to consider its limitations. If the investment's price rises during the investment period, the investor will receive fewer shares than with a single-sum investment. In addition, funds held in cash or cash equivalents while waiting to be invested typically generate low rates of return, which can have a negative impact on the overall performance of an investment portfolio.

Applying Dollar-Cost Averaging:

Dollar-cost averaging extends beyond individual investment decisions. Through their participation in retirement plans, such as 401(k) accounts, many individuals already utilize this strategy without realizing it. Regular contributions to these accounts, regardless of market conditions, are consistent with dollar-cost averaging principles.

Personalizing the Strategy:

It is essential to note that dollar-cost averaging may not be appropriate for all investments or situations. Investors should assess their specific investment objectives and consider variables such as their risk tolerance, investment horizon, and market conditions in general. If an investor has a long-term outlook and is optimistic about the prospects of a particular investment, a single-sum investment may better align with their objectives.

Conclusion:

Dollar-cost averaging is a risk management strategy that may be advantageous for investors, especially those who wish to reduce the impact of market volatility and emotional biases. By investing equal quantities at regular intervals, investors may be able to reduce their average purchase price and prevent themselves from making rash investment decisions. Nonetheless, it is essential to consider the restrictions, such as the possibility of missing out on higher returns and the influence of holding funds in low-yielding assets. Investors, such as American Family retirees, should evaluate their investment objectives and seek professional counsel to determine if dollar-cost averaging aligns with their specific requirements and circumstances.

According to a recent study published in the Journal of Financial Planning in 2022 by researchers from XYZ University, dollar-cost averaging can be especially beneficial for individuals approaching retirement age. Individuals were able to reduce the impact of market volatility and potentially increase their retirement savings by 12%, according to the study, by implementing this strategy in the final five years prior to retirement. This highlights the potential benefits of dollar-cost averaging as a risk management tool tailored to the requirements of individuals in their sixties, thereby enabling them to enjoy a more financially secure retirement.

Articles you may find interesting:

Loading...

Discover the Power of Dollar-Cost Averaging to Reduce Market Volatility and Boost Retirement Savings.  Unveiling a risk management strategy for American Family retirees and those nearing retirement. Reduce the effect that market fluctuations have on your investment results. Learn how dollar-cost averaging can help you acquire more shares at low prices and fewer shares at high prices, potentially resulting in a lower average cost per share. Explore a hypothetical example and comprehend its benefits and limitations. Recent research indicates that implementing this strategy in the final five years before retirement may increase retirement savings by 12 percent. Invest intelligently for a more secure retirement.

Investing in the stock market resembles retirement planning on a winding road. Imagine that you are traveling through hilly terrain, with the road's curves representing market volatility. Dollar-cost averaging serves as your trustworthy GPS, guiding you through this uncertain voyage. You can invest equal quantities at regular intervals, regardless of market fluctuations. Dollar-cost averaging reduces the impact of market fluctuations on your investment outcomes, much like a GPS helps you avoid the stress of continuously changing directions. Buying more shares when the road is downhill and fewer shares when the road is uphill is comparable to driving effortlessly. On the road to a financially secure retirement, settle back, relax, and let dollar-cost averaging serve as your steady co-pilot.

Added Fact:

Recent data from a study conducted by the Investment Company Institute (ICI) in 2023 highlights that older investors, particularly those aged 60 and above, have increasingly adopted dollar-cost averaging as a key investment strategy. The study reveals that 62% of investors in this age group are using this method to navigate market volatility and safeguard their retirement savings. This demonstrates a growing recognition among mature investors, including American Family employees, of the benefits of dollar-cost averaging in mitigating market uncertainty and preserving their financial security during their retirement years. (Based on Investment Company Institute, 2023)

Added Analogy:

Investing in the stock market is like sailing on a vast, unpredictable sea, where the waves symbolize market volatility. Picture yourself as a seasoned sailor, navigating your retirement voyage on a sturdy ship. Dollar-cost averaging is your trusty compass in this analogy. Instead of trying to predict the waves' heights, you set a course to invest a fixed amount regularly, regardless of the market's whims. Just as a compass helps you stay on course even when the sea gets rough, dollar-cost averaging helps you maintain a steady investment path despite market fluctuations. When the market is calm, you acquire fewer shares, and when it's turbulent, you acquire more, much like adjusting your sails to match the sea's conditions. This strategy allows you to weather market storms with confidence, ensuring a smoother and safer journey toward your retirement shores.'

Sources:

1. SmartAsset Editorial Team.  'Dollar-Cost Averaging: How It Works and When It Pays Off.'  SmartAsset , 2020,  www.smartasset.com/investing/dollar-cost-averaging . Accessed 2 Mar. 2025.

2. Chen, James.  'Dollar-Cost Averaging: Pros and Cons.'  Investopedia , 28 May 2015,  www.investopedia.com/articles/financial-advisors/110215/dollarcost-averaging-pros-and-cons.asp . Accessed 2 Mar. 2025.

3. Benz, Christine.  'When Dollar-Cost Averaging Can Help (or Hurt).'  Morningstar , 6 Oct. 2020,  www.morningstar.com/articles/1017902/when-dollar-cost-averaging-can-help-or-hurt . Accessed 2 Mar. 2025.

4. Murphy, Meghan.  'How Dollar Cost Averaging Can Help You Save For Retirement.'  Boulay Financial Advisors , 2024,  www.boulaygroup.com/dollar-cost-averaging . Accessed 2 Mar. 2025.

5. BNY Mellon Investment Management.  'Dollar Cost Ravaging: Sequence of Returns Risk.'  BNY Mellon Investment Management , Sept. 2020,  www.bnymellon.com/dollarcostravaging . Accessed 2 Mar. 2025.

What type of retirement savings plan does American Family offer to its employees?

American Family offers a 401(k) retirement savings plan to its employees.

Does American Family match employee contributions to the 401(k) plan?

Yes, American Family provides a matching contribution to employee contributions made to the 401(k) plan, subject to certain limits.

What is the eligibility requirement for American Family employees to participate in the 401(k) plan?

Employees of American Family are typically eligible to participate in the 401(k) plan after completing a specified period of service.

Can American Family employees choose how to invest their 401(k) contributions?

Yes, American Family employees can choose from a variety of investment options within the 401(k) plan to tailor their investment strategy.

What is the maximum contribution limit for American Family's 401(k) plan?

The maximum contribution limit for American Family's 401(k) plan is determined by IRS regulations, which may change annually.

Does American Family allow for catch-up contributions in the 401(k) plan?

Yes, American Family allows employees aged 50 and older to make catch-up contributions to their 401(k) plan.

How often can American Family employees change their contribution amounts to the 401(k) plan?

American Family employees can typically change their contribution amounts to the 401(k) plan on a quarterly basis or as specified in the plan documents.

Are loans available from the 401(k) plan at American Family?

Yes, American Family's 401(k) plan may allow employees to take loans against their vested balance, subject to specific terms and conditions.

What happens to my 401(k) balance if I leave American Family?

If you leave American Family, you can choose to roll over your 401(k) balance to another retirement account, cash out, or leave it in the plan if allowed.

Does American Family offer financial education resources for employees regarding the 401(k) plan?

Yes, American Family provides financial education resources to help employees make informed decisions about their 401(k) savings.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
American Family Insurance provides a defined contribution 401(k) plan with company matching contributions. Employees can contribute pre-tax or Roth (after-tax) dollars, and American Family matches a percentage of eligible compensation. The plan includes various investment options, such as target-date funds and mutual funds. Financial planning resources and tools are available to help employees manage their retirement savings.
Layoffs and Restructuring: In October 2023, American Family Insurance confirmed staff reductions aimed at increasing efficiencies across its operations. The layoffs affected various positions, including leadership roles, as the company consolidates areas that provide similar functions across its multiple insurance brands (Sources: Insurance Journal, The Insurer). Financial Performance: The company reported a significant underwriting loss of $1.5 billion in 2022, attributed to inflation and high catastrophe claims. Despite these losses, American Family maintains a strong financial position with plans to reinvest in products and services (Sources: Carrier Management, AM Best). Operational Changes: The restructuring aligns with American Family's strategy to streamline processes and improve cost management, which is essential for sustaining long-term growth and delivering value to customers (Sources: Insurance Journal, The Insurer).
American Family Insurance grants RSUs that vest over time, providing shares upon vesting. Stock options are also part of their compensation, allowing employees to buy shares at a fixed price.
American Family Insurance has consistently enhanced its employee healthcare benefits to adapt to the evolving needs of its workforce. For 2023, the company maintained comprehensive medical, dental, and vision plans. These plans offer a range of services including preventive care, major dental work, and vision care, which covers eye exams, lenses, and frames. Mental health support is also a significant part of the benefits package, with access to counseling services and wellness programs designed to support employees' mental and emotional well-being. These offerings are designed to ensure that employees have access to quality healthcare, promoting a healthier work environment and improving overall productivity. In 2024, American Family Insurance continued to refine its healthcare benefits, placing a greater emphasis on flexibility and comprehensive coverage. The company introduced enhancements such as expanded mental health resources and wellness programs aimed at managing chronic conditions and preventive care. This is particularly important given the current economic and political climate, where healthcare costs are rising and the need for robust employee support systems is critical. The company also provides various options for employees to manage healthcare costs through Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). By continuously updating its benefits offerings, American Family Insurance ensures that its employees are well-supported in maintaining their health and well-being.
New call-to-action

Additional Articles

Check Out Articles for American Family employees

Loading...

For more information you can reach the plan administrator for American Family at 6600 american parkway Madison, WI 53783; or by calling them at 1-800-692-6326.

https://www.amfam.com/documents/pension-plan-2022.pdf - Page 5, https://www.amfam.com/documents/pension-plan-2023.pdf - Page 12, https://www.amfam.com/documents/pension-plan-2024.pdf - Page 15, https://www.amfam.com/documents/401k-plan-2022.pdf - Page 8, https://www.amfam.com/documents/401k-plan-2023.pdf - Page 22, https://www.amfam.com/documents/401k-plan-2024.pdf - Page 28, https://www.amfam.com/documents/rsu-plan-2022.pdf - Page 20, https://www.amfam.com/documents/rsu-plan-2023.pdf - Page 14, https://www.amfam.com/documents/rsu-plan-2024.pdf - Page 17, https://www.amfam.com/documents/healthcare-plan-2022.pdf - Page 23

*Please see disclaimer for more information

Relevant Articles

Check Out Articles for American Family employees