Posted: 5-8-25 | Innovia Wealth
Innovia Planning Insights: Enhanced Dollar-Cost Averaging
Dollar-cost averaging is an investment strategy where one consistently invests a fixed amount of money at regular intervals, regardless of market conditions, thereby reducing the impact of market volatility. Enhanced dollar-cost averaging builds on that concept by temporarily increasing investment amounts during down markets. By doing so, investors can purchase more shares when prices are lower, which reduces their overall cost per share over time.
For example, suppose an investor normally invests $10,000 monthly into a stock portfolio. During a market downturn, they might temporarily boost that monthly contribution to $15,000 or $20,000, capturing more shares while prices are depressed.
This proactive strategy can amplify long-term returns by positioning portfolios to rebound more robustly when markets eventually recover. While traditional dollar-cost averaging helps investors stay disciplined, the enhanced approach adds opportunistic flexibility, turning temporary market volatility into potential advantages.
However, maintaining the core dollar-cost averaging plan is equally important, as it ensures consistent participation in the market regardless of fluctuations. Solely relying on enhanced dollar-cost averaging to “buy the dip” can cause investors to miss ongoing growth opportunities during stable or rising markets.
Market Dynamics
| Asset Class | 1 month returns | Year to date (chart below) | 3-year returns (annualized) | 5-year returns (annualized) |
| Large companies (S&P 500) | -0.8% | -5.1% | 12.1% | 15.6% |
| Big technology businesses (Nasdaq 100) | 1.6% | -6.7% | 16.0% | 17.8% |
| Small companies (Russell 2000) | -2.3% | -11.6% | 3.3% | 9.9% |
| Foreign stocks (ACWI ex US) | 3.7% | 9.3% | 8.6% | 10.6% |
| Bonds (Bloomberg US Aggregate) | 0.4% | 3.2% | 2.0% | -0.7% |
April Recap: Relief Rally for Stocks, Bonds Hold Steady
April started off rocky, with stocks falling sharply following President Trump’s announcement of reciprocal tariffs on a range of imported goods. Markets recovered after he softened his stance and, crucially, walked back the rhetoric to remove Federal Reserve Chairman Jerome Powell.
International equities led the way in April, delivering another strong month as the U.S. dollar fell 4.3% (see chart below). A weaker dollar enhances overseas returns for U.S. investors. U.S. large-cap stocks—particularly major technology firms—rebounded strongly. In contrast, small-cap stocks lagged due to concerns over rising input costs and tighter credit conditions.
Fixed income markets posted modest gains. The 10-year Treasury rate ended the month essentially flat having initially dropped 5% before rebounding 10% and then declining again (see chart below). Lower-quality credit weakened but remained within historical norms.
The dollar is falling even as US interest rates remain flat.
Corporate Earnings and Economic Signals
First-quarter corporate profits grew a solid 10% year-over-year. However, forward-looking earnings estimates were revised downward amid ongoing tariff uncertainty and signs of slowing global trade.
Economic data painted a mixed picture. Retail sales, employment figures, and both services and manufacturing indicators showed unexpected resilience. Yet, leading indicators—including new business orders and industrial production—signaled a possible slowdown ahead.
Looking Ahead: Tariffs and Global Realignment in Focus
Looking forward, the economic outlook is clouded by “front-loaded” activity, such as a surge in gold and commodity imports ahead of tariff implementation. As a result, first-quarter GDP showed a 0.3% decline (see below), driven entirely by negative imports, despite strong business investment and consumer spending.
GDP growth declined -0.3% in Q1 2025.
Markets are increasingly driven by tariff-related headlines rather than economic fundamentals or corporate earnings—a trend likely to persist until a clearer policy direction emerges.
In parallel, global markets are adjusting to a more inward-focused U.S., which is prioritizing national interests over traditional trade and defense alliances. This realignment is influencing asset valuations across equities, fixed income, currencies, and commodities, with heightened volatility expected.
Investment Strategy & Outlook
We continue to emphasize the importance of diversification and disciplined portfolio management. The risk of stagflation—where inflation rises even as unemployment increases—has grown, especially if tariffs tip the economy into recession and the Federal Reserve responds with aggressive monetary easing.
In such scenarios, historical trends suggest international and value stocks will likely outperform, while small-cap equities could face continued challenges. Fixed income returns may also suffer, as inflation typically erodes bond prices.
That said, given how quickly political positions can shift, we do not recommend aggressive tactical moves. Instead, we advise staying focused on long-term objectives, rebalancing portfolios with care, and using market downturns as opportunities to harvest tax losses when appropriate.
We believe that well-balanced portfolios—combining public market exposure with private market strategies managed by experienced professionals—offer the strongest defense and offense in navigating today’s uncertain environment.
As always, if you’d like to discuss your portfolio, our outlook, or market conditions, please don’t hesitate to get in touch.
Private Market Pulse: Seed Capital Investments
Providing seed capital to managers can result in distinct investment opportunities and is something we focus on at Innovia. What is a seed investment? It is an opportunity to invest early in a fund or manager’s life and potentially receive an excess return from the manager in addition to the results of the underlying strategy. Innovia does this in multiple ways in a variety of places in our clients’ portfolios. One of the common places we look to do this is by investing in newly established semi-liquid funds across private equity, private credit, or private real assets. In these cases, additional economics often take three forms: the simplest is fee reductions for early investors that directly increase the return by the amount of the fee reduction; the second common option is a bonus for investing in the strategy; the last frequently seen option is to receive some of the General Partner (GP) economics of the underlying fund. In the bonus structure, clients receive a bonus (often 3-5%) added to their investment immediately after making their investment. In the share of the GP case, clients receive a part of the revenue that the managing partner receives. Sometimes this revenue lasts as long as you hold the position, and sometimes it lasts for a defined period. Either way, we believe these incentives are worth investigating
Of course, with any reward typically comes some form of sacrifice. You may be asking, what am I giving up to get this incentive? The biggest cost to the seed economics is liquidity. Usually there is an extended hold period for early investors who receive these opportunities. Pausing to think about it, that makes sense. An investment manager would not want the new investors that they have incentivized to go into their fund to leave right after getting the incentive. One other cost to keep in mind is portfolio ramp up risk. This could be a period of lower returns that you endure as the portfolio invests cash into underlying investments. This is often why a manager needs seed investors. They want someone to provide initial dollars to build a portfolio that they can market to bigger clients. They cannot go to those clients right away, because returns will not be regular until the portfolio is built. We believe a share of the GP is a fair exchange for a period of ramp up risk, but a fee reduction or bonus might not be enough incentive if the portfolio is not built yet.
We would be happy to discuss the current opportunity set of seed investments that we are investigating if you are interested or think they could have a place in your portfolio.