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Investment News You Can Use - MARCH 2010
What is Dollar Cost Averaging?
Dollar Cost Averaging is a strategy in which you invest a fixed dollar amount at regular intervals over a certain length of time – regardless of fluctuations in the market. When the market is down, you reap the benefits of purchasing more shares at a lower, more attractive cost. And when the market is up, you purchase fewer shares because prices are higher. This investment technique is different than other methods, in which investors might try to guess when market prices will be low and try to invest at the right moment. Instead, dollar cost averaging ensures that investors are purchasing at regular intervals and are able to take advantage of market slumps by automatically buying more of an investment for the same amount of money. Dollar cost Averaging takes some of the guesswork out of investing.
More importantly, Dollar Cost Averaging encourages disciplined investing, which can result in a lower average cost per share. Periodic investment plans do not assure a profit or protect against loss in declining markets. This type of plan involves continuous investment in securities, regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low price levels.
Advantages of Dollar Cost Averaging
Dollar Cost Averaging offers a number of benefits that make it a worthwhile strategy to employ:
• Encourages discipline. Once you have begun, it serves as a strong reminder to invest at the appointed time.
• Eliminates the need to decide when to invest. When it’s time to invest, you do so, regardless of what’s going on in the market.
• Avoids the temptation to time the market. Some investors cannot resist the urge to try to invest at a market low and take their profits at a market high. They usually fail because the task is virtually impossible, even for the experts.
*Thomas Hogan is a Registered Representative of INVEST Financial Corporation (INVEST), member FINRA/SIPC. Securities, Advisory Services, and Insurance Products offered exclusively through INVEST Financial Corporation, and affiliated insurance companies, 1225 Johnson Ferry Rd, Suite 600, Marietta, GA 30068. INVEST is a Registered Investment Advisor, and is not affiliated with Buckhead Financial Services, LLC or other individuals or entities named.
This website may contain concepts that have legal, accounting, and tax implications. INVEST does not provide legal, accounting, or tax advice. INVEST does not offer mortgages or commercial lending services. You may wish to consult an attorney regarding your specific situation. No representations are made as to the accuracy of the information contained in any link provided herein.
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