Dollar Cost Averaging - What is It?
We previously shared that April is National Financial Literacy Month and asked the question, do you know what dollar-cost averaging is?
Dollar-cost averaging is a technique that entails investing a fixed amount of money into the same investment at regular intervals over a long period of time. This is particularly relevant and important to keep in mind as the market fluctuates. You may already be using this technique if you have a 401K plan with your employer.
Dollar-cost averaging is one of many strategies used to save for retirement. The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. When the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will buy more shares. Over time, the average cost per share you acquire will likely compare quite favorably to the price you would have paid if you had tried to time the market.
When markets rapidly move up and down, it can be challenging for many investors to avoid trying to time the market. Emotional buying and selling often times does not work out long-term. Having your investments actively and professionally managed is one of the best ways to protect your financial well-being. If you haven't already, we encourage you to watch the video playback from one of our virtual events on this topic - Protect Yourself From Yourself.
If you are interested in increasing your financial literacy and would like to discuss your financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.