Contrary to popular belief, you do not need perfect timing to survive — and thrive — in markets like these. Rather, you can use a strategy known as dollar cost averaging.
Despite the name, dollar cost averaging has nothing to do with currencies at all. Instead, it refers to buying equal dollar amounts of the same investment on a predetermined schedule.
For example, let’s say you’ve decided to invest $10,000 in XYZ Corp. Rather than deploying the entire amount at one time, you might instead opt to purchase $1,000 of XYZ stock on the first day of each of the next 10 months.
What’s the logic behind this approach? Well, you can expect just about any stock’s price to vary substantially over a ten-month period. So, when the price is higher, your $1,000 will buy less shares; when the price dips, your $1,000 will buy more shares.
In other words, buying equal dollar amounts over time allows you to reduce your risk to a stock’s short-term price movements, automatically encouraging you to buy more when prices are lower and less when prices are higher.
For more on how this strategy – and how it could have made you money even during the Great Depression, read all about a great “Dividend Investing Strategy” for the Ages
To your dividend investing success,
InvestingInDividends.com
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