A scientist colleague of mine, a quiet 52-year old fellow with mind sharp as a tack in most earthly matters, has become caught up in the same affliction that many of us get in these uncertain financial times. He wanted to time the market, to make most of the up-down-up cycles of the ongoing fluctuations.

He tried to buy $5000 worth of stocks just before the end of Monday, when the stock market was showing a noticeable slide. Fed was making noises of giving it a boost the next day, so he was correct in thinking that stocks will take off Tuesday on this positive news, thereby netting him a tidy gain.

S&P500 index dropped 20 points by the end of Monday, a 1.55% loss. Federal bank announced a $200 billion loan to the banks the following day, and the index soared 47 points by closing time Tuesday, a whopping 3.7% gain. If my friend were to buy a mutual fund that tracks S&P500 index, he could have made 3.7% in a single day!

So, what went wrong? He failed to time his buying. He did send the money before the end of Monday, but the transaction could not be completed before Tuesday, when stocks were already near their peak. And by closing Wednesday (today), the index is again down 12 points, and so he actually ended up losing money.

If I were him, I would have spread $5000 into several small transactions over the entire month, which increases the odds of riding at least one wave from the bottom to the top – the standard advantage of dollar-cost averaging. What is more, you can automate the process, and do not have to spend any time trying to track the market.

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