Q. What is dollar cost averaging?
A. Dollar cost averaging is when you invest a set dollar amount on a monthly basis.
For example, let’s say you’re able to invest $500 a month in the market. You’d invest $500 on the 15th of every month, regardless of what the market is doing.
Investing this way has tremendous advantages if you can do it. When you consistently buy, you’re going to make purchases at every price point. You’ll buy on days the market is down as well as days the market is up. The performance over time will be significant because of your contributions buying.
Dollar cost averaging is the best way to invest, if you can do it.
However, the most important thing is to just start investing, period.
Click the image of the book at left to be taken to its Amazon page. (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)