Now that it's 2007, I figured I would start a new investing strategy this year since I feel like a lot of my cash is sitting uninvested in the bank earning low interest. (Low being 5%+)  After thinking about how best to allocate my index funds, I've come up with a novel idea to mix dollar cost averaging, index funds, asset allocation, and a bit of market timing into my own strategy.

Looking at my income, I figure I can easily sock away $2,000 a month into indexing with a minimum investment time period of 3-5 years and possibly until retirement.  I looked at ETFs, but the cost of dollar cost averaging once every month was too much, so i've decided to stick with mutual funds as there is no transaction cost.

My idea is to invest that $2,000 once every month.  Now the question of when to invest it in that month is answered by using these rules. 

1. If index_fund_price drops 1% at the end of the day, put in an order to buy some.

2. If by the end of the month, the index_fund_price has not dropped 1% in any of the past 30 days, then put in an order to buy some.

This way I will still dollar cost average and be able to market time the lows a little bit. 

My considered no-fuss simple asset allocation for my taxable account:

Vanguard Total International Index Fund (VGTSX) | 40% | .32% expense ratio

Vanguard Total Stock Market Index (VTSMX) | 40% | .19% expense ratio

Vanguard Small Cap Value Index (VISVX) | 20% | .23% expense ratio

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Total: 100%

 If I were investing for a tax deferred account, i'd definitely throw in a REIT fund in there.  The reason why it's not a good idea to throw it in a taxable account is that you will pay a lot of taxes on the dividends they distribute every period.

Vanguard REIT Index (VGSIX) | 10% | 0.21% expense ratio

I was also hoping to throw in a Vanguard fund for precious metals (gold), but the only one I could find was closed to new investors. 

The only thing I have to do is to code a script that will check the prices everyday and email me whenever any of those conditionals are met.  I will attempt to update this article with my results at the end of every month.  I would definitely like to backtest this strategy using old stock market data, but that will take some time to do.  Depending on how this strategy works out over the course of this year, I will decide whether to continue this strategy in 2008, but that is still quite a while in the future.

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