Dollar Cost Averaging

The sooner you buy,the longer you have your money at work and the more money you have to compound.Take 50% of your monthly savings and sock it away into your chosen index fund(s).Do this every month without fail for the rest of your life.If you'll do this,even if you do nothing else i describe i have posted in my previous posts,then in due time the floodgates of prosperity will pour into your life.But if all of your short-term "hare-brained" schemes come to naught,this "tortoise" strategy will have you slowly giggling yourself toward a prosperous future. If you're like most folks,you don't have a lump sum lying around.You're forced to invest in periodic payments over time.When you invest a fixed amount every single month for a long period of time,you're actually practising a rather sophisticated strategy called dollar cost averaging.With dollar cost averaging,you're actually hoping for a price decline every once in a while.It gives you a chance to buy more shares at a cheaper price.That is why you can look at temporary stock market slumps as positive events in your long-term investment horizon. Dollar cost works only if you continue buying,especially during bad times and hold on until good times return.If you stop buying during the bad times,you lose your advantage when thing rebound.Here's the number one reason that dollar cost averaging is so powerful:it completely eliminates the need to guess when you should buy.It takes away the need for the market timing. What is market timing?If you're really smart(or have a lot of time on your hands),you can try to forecast the highs and lows in the market.At the peak,when the market is just beginning to dip from its highs into a trough,market timers say you should cash in your chips and park your money in some risk-free checking account.Then,when the market hits bottom and starts to bounce back,that is the precise time for you to buy with both hands.Sounds easy,but only handful of investors have been smart enough to do it. For example,during the entire decade of the 1980s the S&P 500 Index gained 17.6% annually,with frequent dips and spurts.During this period there were 2,528 trading days.A full 28% of the entire profit for the decade was generated in just 10 days.If you had been trying to time the market and happened to miss those 10 critical days,you would have lost 28% of your gain for the entire decade! With dollar cost averaging,you don't have to be smart.You can be a total idiot and still win.You just buy every month after month,you buy during the good times,you buy during the bad times.You don't care what the headlines are saying.You ignore the experts on TV.You don't get jealous when you hear that one stock(out of 10,000) tripled in price that day.Alot of other investors also bought the one that dropped by two-thirds on the very same day.You just blindly and ignorantly do what you have alwaysdone-buy,buy.buy.The average price of your continued buying will give you a wonderful average long-term return.This,of course,assumes that the past 50 -year history of 11% compounded annual stock market gains continue for the next 50 years into the future.This is not necessarily a sure bet! For more information Click Here!