Knowing when to invest your savings and when to wait on the sidelines is impossible to time with any accuracy, and in fact trying to time the market has been shown to reduce an investor’s overall return. An alternative to trying to time the market is dollar cost averaging which is when you invest a pre-determined dollar amount on a set schedule, regardless of the market movements. Dollar cost averaging has two primary benefits. One is the investor will be more disciplined about investing their surplus cash rather than spending it if they have an automatic transfer of savings to their investment account on a set schedule. The second benefit is when stocks are more expensive, you will purchase fewer shares and when stocks are cheaper you will purchase more share, thereby lower your average cost per share over time.
Provided for general education and informational purposes only. March 2018 © Access Financial Planning, LLC