Saving & Investing
Dollar-Cost Averaging: A Smart Way to Invest/ August 7th, 2020
Investing can be easy and painless.
An efficient method, called dollar-cost averaging, lets you invest small amounts on a regular basis. Once you set it up, you might not even notice how quickly your account may grow—and you probably won't even miss the money you're putting away.
With dollar cost averaging, you invest the same amount of money—from a little to a lot—on a regular schedule, regardless of price. Your fixed investment buys more shares when the market is down, so you'll have more shares that will grow when the market rebounds.
Some mutual fund groups even waive initial minimums if you deposit funds directly from your paycheck or checking account.
Combining dollar cost averaging with a mutual fund investment may further improve your chance of future success, as long as you choose a fund with low expenses. The combination is an excellent way to build long-term wealth.
Here's how to start:
1. Decide how much money you can afford to invest each month.
2. Select an investment that you want to hold for the long term.
3. Complete any paperwork to ensure that you're making automatic investments at regular intervals.
This type of systematic investing is one of the best ways to invest. Using this approach, you may be able to lower the overall cost of your investment. Making regular investments in specific mutual funds every month, or quarter, will be easier to handle instead of having to come up with a lump sum.
*Neither CUNA nor the author of this article is a registered investment adviser. Readers should seek independent professional advice before making investment decisions.