Investing can be a stimulating diversion from the demands of work or just added stress. If you’re in the second camp, there’s an investment approach that might appeal to you.
DOLLAR-COST AVERAGING
Dollar-cost (DCA) averaging emphasizes consistent investing regardless of market ups and downs. With DCA, you invest in a security over time in regular, equal amounts rather than a lump sum. That way, you don’t have to worry about timing your investment to buy it at the lowest price. You’ll be investing at both low and higher prices, which can potentially even out your purchase costs and provide more consistent investment returns over time.
NO GUARANTEE
Dollar-cost averaging doesn’t guarantee a profit or protect against loss. At times, it can underperform lump sum investing. And you need to consider whether you’re comfortable weathering short-term market ups and downs.
But if implementing DCA and simply keeping yourself updated on your portfolio sounds attractive, this strategy may be the way for you to go for long-term investments. Your financial and tax professionals can provide guidance.