Taking the Guess Work Out of When to Invest, Especially in Uncertain Times

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When it comes to investing, everyone would love to buy low and sell high. If we could find the magic to always make that happen – we would all be sitting pretty.

Since no one really has that kind of magic, most of us are better off to stick to a simple investment strategy called dollar-cost averaging.

In plain language, dollar-cost averaging is investing the same amount on a set schedule. For example, you invest $500 (or $50 – any amount works) on the 15th of every month. Regardless of the stock or fund price – you invest the same dollar amount.

If the price is up, you are buying fewer shares; and conversely, if the price is low, that same dollar amount will buy you more shares. Over time, this can result in a lower per share cost, but as with all investing – this is not guaranteed.

From Sum180 member, Stacey: “Why do I like this? Well, trying to time the market is very risky and at a minimum it is very time consuming. Keeping an eye on all of the variables can make me go cross-eyed!”

Importantly, it removes the emotion from investing. If you do your homework, find a mutual fund that you like, and think long term, dollar-cost averaging takes the guess work out of investing.

Historically, the stock market is a great place to invest long term. Committing to a dollar-cost averaging investment plan assures that you are putting away money on a regular basis. This is key. Allowing dividends to automatically reinvest is yet another layer of dollar-cost averaging that is working for your benefit.

From Sum180 member, Kelby: “+1 for Dollar-cost averaging! No one can predict what the stock market is going to do and attempting to time it is an exercise in futility. Dollar-cost averaging removes emotion from the equation which is HUGE when it comes to long-term investing.”

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