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I have setup automatic withdrawal with my brokerage to purchase shares of an S&P500 Index fund the 8th of every month. When I first caught wind of the USA credit downgrade Saturday morning, I started thinking "... maybe I should change my automatic purchase date of the S&P500 Index fund to later in the week". Sure enough, my purchase at opening today lost about 3.5% of its value within a few hours.

Given that you will certainly purchase $X of an index fund every month, do you micro-manage the exact day of the month to purchase that fund based on the news?

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That's the kind of strategy that "works until it doesn't."

Some people have observed daily, monthly, "seasonal" patterns in trading that exist, usually for psychological reasons. These observations work until enough people "catch on." Then they move the calendar. In order to continue to succeed, you have to keep one step ahead of the crowd.

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I don't. I'm choosing to dollar cost average (like you describe) to reduce my risk to price volatility. If I start moving things a day here or there I'm just as likely to skip a month and double the next month and very quickly I won't be dollar cost averaging anymore.

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(I'll assume you're talking about exchange-traded index funds – ETFs – which trade throughout the day, as opposed to index mutual funds which trade only at end of day prices.)

You should consider changing your strategy so you don't buy your ETFs at the trading day's opening.

The opening – particularly after a weekend or holiday– can be quite volatile relative to the rest of the day. Worse, if you are placing a "market" buy order at opening, i.e. willing to pay the price asked (likely the case if you have an automatic buy in place) then you're going to be victim to that volatility more often than not.

If your broker can't perform your automatic trades except at the opening as a "market" order, I would suggest taking control of the trades yourself in order to make them later in the day.

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