Dollar cost averaging is an great way to diversify your investment risk.
There's mainly 2 things you want to achieve when you're saving for retirement:
1) Keep your principal investment;
2) Grow it.
The best methods recommended by most financial institutions are as follows:
There are a lot of additional recommendations, but these are my main take away. When you dollar cost average, you're essentially diversifying your exchange risk between the value of the funds you're investing.
Including the ups and downs of the value of the underlying asset, may actually be re-balancing.
Picking your asset portfolio:
1) You generally want to include within your 401k or any other invest, classes of investments that do not always move in total correlation as this allows you to diversify risk;
2) I'm making a lot of assumptions here - since you may have already picked your asset classes.
Consider utilizing the following to tell you when to buy or sell your underlying investment:
1) Google re-balance excel sheet to find several examples of re-balance tools to help you always buy low and sell high;
2) Enter your portfolio investment;
3) Utilize the movement to invest in the underlying assets based on market movement; and
4) Execute in an emotionless way and stick to your plan.
1) I have 1 CAD and 1 USD in my 401k.
Plan I will invest 1 dollar in the ratio of 50/50 - forever.
Let's start in 2011 since we were closer to par:
2010 - 1 CAD (value 1 USD) and 1 USD (value 1 USD) = 50/50 ratio
2011 start - 1 CAD ( value .8 USD) and 1 USD (value 1 USD) = 40/60 ratio
2011 - rebalance - invest 1 USD as follows purchase .75 CAD (.60 USD) and purchase .40 USD = total of 1 USD reinvested
2011 end - 1.75 CAD (value 1.4USD) and 1.4 USD (value 1.4 USD) - 50/50 ratio
As long as the fundamentals of your underlying assets (i.e. you're not expecting hyperinflation or your asset to approach 0), this approach will always build value over time since you're always buying low and selling high while dollar averaging. Keep in mind it does reduce your potential gains - but if you're looking to max gain, it may mean you're also max potential loss - unless you're able to find A symmetrical investments.
I hope this helps.