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Start a Long-term Affair Today!  (With Dollar Cost Averaging)

ITIPress.org - Soraya Nasrallah

Dollar Cost Averaging is a great way to heal those Bear inflicted wounds! You select an investment and add a fixed dollar amount to it on a regular (monthly) basis, regardless of market trends. The end result is usually a lower average per share cost to the investor than the average price of the shares over the time period.

Whether you are purchasing a mutual fund or an individual stock, you are constantly invested in the market, not jumping in and out. With Dollar Cost Averaging (DCA), you automatically buy fewer shares when the price is high and more shares when the price is low. The goal of DCA is to obtain a lower cost per share of stock.

Timing the market is extremely difficult and it requires you to be on the lookout on a constant basis. The reality is that the most of us donít have the time to be looking at every single move a stock or mutual fund makes every day. DCA enables an investor to put their money to work and also maintain their peace of mind. The best part of DCA is that you can even have the desired fixed amount of money you wish to invest automatically drafted from your checking account! This will help you to continually invest for your future and not think twice about it! It is a great way to fund any account, especially your retirement account (IRA). Investing a lump sum at a specific time could possibly offer you a higher return, but by investing a smaller sum on a steady basis you can decrease market risk.

We all know how the Bear market has treated us, and because of this many investors are having a difficult time gathering up the money and confidence to start investing again. But remember, you MUST continue to fund your retirement! Donít expect a sudden market turn around to bring back life to all youíre still holding. It will take time for that to happen, and some investments might never return from the dead! For investors who have been attacked by the Big Bad Bear, Dollar Cost Averaging may be a great solution to get you back on the path to successful investing.

Here are some basics steps and tips to follow:

1. Figure out how much money you can invest on a monthly basis. Make sure this money is automatically withdrawn from your bank account and invested. Pay yourself first!

2. Make a decision as to where you wish to invest that regular dollar amount. Remember, you may split this amount among a variety of investments. Do your research beforehand, so that you wonít have seconds thoughts about your decision and you will stick to it. Do not "trade" the account(s).

3. Donít confuse action with performance! Be patient when it comes to your retirement dollars. Many investors are eager to buy and sell because it is more exciting. Unless you have a very good reason to sell, donít!

4. Diversify your retirement account(s). Over time, solid dividend paying companies, mutual funds, individual growth stocks and index tracking shares can offer you a great retirement mix. How much you invest on a monthly basis will largely determine the size of your retirement account in the future.

5. Invest an occasional "lump sum" or extra amount of money into your account to help you get ahead of the game. Especially try to take advantage if you are faced with a great buying opportunity due to a market downturn. But always make sure that you continue to automatically invest a fixed dollar amount. By doing this you will avoid being disappointed a few years down the road, when youíll likely find out that if you had stuck to the plan you would have made a lot more.

Write to Soraya@TheInvestor.tv or Info@TheInvestor.tv for questions

''Anyone who stops learning is old, whether at 20 or 80.'' - Henry Ford

 

 

 

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