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dollar cost averaging
Can we expect folks with average or below average incomes to be able to amass a sufficiently large financial nut in retirement? Or, more simply, is it reasonable to expect to be able to grow wealth with stocks? Financial sites like to stress that good decisions over a sufficiently long time lead to very good […]
We’ve had a lot of recent fun with our two part (and… growing?) series on reinvested dividends. First we told you that timing month to month purchases was a waste of time. Then, when the goalposts were moved, we redid our analysis for yearly purchases (while addressing the criticisms and giving you a wonderful story […]
If you have been following us lately, last week we posted an article which argued that typical Americans were better off not trying to time the market when they invested monthly through paycheck deductions (say, 401(k)s or automatic investments in IRAs). That’s right: periodic investing and dollar cost averaging is our opinion of the best […]
Dollar cost averaging: an excellent strategy for the investor with money to deploy, but worried about the risk of going into the market all at once. With that in mind, this article will try to set your mind at ease and explain how dollar cost averaging might just be the psychological trick you need to […]
It’s been mentioned many times, here and elsewhere, that simply putting money into the market is the best strategy to invest and performs better than trying to time the market or choose individual stocks. This is coming off Warren Buffett pulling ahead of the hedge fund of hedge funds. I have an inkling that most people here will agree with this.
Dollar Cost Averaging (DCA) is touted by some financial planners as the solution to all of investing’s problems. By continuing to invest money at a regular interval, you buy more shares when prices are low and more shares when prices are high. Additionally, dollar cost averaging fits the general schedule of how people normally get paid – every two weeks you get your paycheck, and you also automatically invest in your 401(k), for example.
That’s great… for predictable streams of income. This article will *not* try to convince you to stop your normal recurring investments. However, dollar cost averaging meets its match when introduced to a windfall. When you have extra funds, you shouldn’t tiptoe into the market, you should dive right in with a lump sum investment. Don’t believe me? Let me convince you…