In this blog post, we take a look at a process known as Dollar Cost Averaging, a technique which sounds quite complicated but is essentially a very simple method of investing.
The golden rule of successful investing is; buy low, sell high. Sounds simple doesn’t it. All you need to do is buy shares when prices are low and sell them when prices are high. However, markets are far from predictable and can move quickly and erratically in either direction. Throw in to the mix the fact that many investors are controlled by emotions and it’s perhaps not so easy after all.
In simple terms, Dollar Cost Averaging is the practice of using regular deposits to help smooth out stock market investment volatility. The key point about dollar cost averaging is to invest a small amount on a regular basis. In a fluctuating market, cost averaging can allow you to benefit from buying more investment units when prices are lower.
Deciding when to invest in a volatile market can be off-putting to
both the new and seasoned investor. Rather than standing on
the edge, trying to second guess what happens next, a regular
savings plan could be the answer. By investing a consistent amount
at regular intervals, you can gradually ‘drip-feed’ into the market
regardless of the price on any given day. This allows you to take
advantage of price movements, as you will buy more units when
prices are lower and less when they become more expensive.
The best time to start saving for your retirement is when you receive your first pay packet, in reality this is easier said than done. Don’t worry though, you will be pleased to know that the next best time is today. If you want to keep the life you have become accustomed to and enjoy your retirement, take action now and make every day count.
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