The Fundamentals Of Dollar-Cost Averaging

Whether you work with us or follow our blog, you may hear us reiterate specific themes. For instance, the professionals at Worth Advisors, LLC believe that financial management is for everyone regardless of their economic position or perceived status. Another one of our core messages is that you should stop trying to time the market. Recall movies such as The Wolf of Wall Street or just Wall Street. People unfamiliar with investments or investment strategies may need help understanding what financial advisors do. 

Specifically, we are referring to “timing the market.” Hypothetically, this is when you invest in something when it is low and before it suddenly increases in value. Then you sell your shares for a significant profit. Anyone who thinks this is what investing is may dismiss it outright. If they don’t understand the market and cannot foresee a trend, they assume investing is for those who do. This is unequivocally false, and we are about to explain why. 

Let Success Come to You 

Timing the market is difficult even for experienced investors! Instead of trying to predict the market, accept that it will fluctuate and irregular intervals. Dollar-cost averaging embraces this concept and can deliver long-term financial success despite fluctuations. The basic premise of dollar-cost averaging is that you invest at regular intervals regardless of the purchase price. To give you an easy example, imagine that you have $1200 to invest. Rather than spending your $1200 on one stock and hoping the market works in your favor, i.e., timing the market, invest $100 a month in a mutual or index fund. 

When the market is up, and prices are high, your $100 will yield fewer shares. When the market is down and prices are low, that same $100 investment will enable you to purchase more shares. People who invest this way shift their focus to the long-term. Why? Because over several years, you will likely see that your cost per share, on average, is lower than if you had invested the money all at once. 

Experience a Shift in Mindset

When you understand how basic dollar-cost averaging is—and how well it works—you will embrace the fact that investing is for anyone willing to do it. It comes down to discipline instead of studying and watching the market round-the-clock in hopes of gambling a sum of money on the market. Allow yourself the freedom to invest despite what the market is doing, and have confidence that you will succeed over the long term. 

Dollar-cost averaging is one way to survive the inherent corrections of the market. At Worth Advisors, LLC, we believe in a diversified approach by investing in stocks, mutual funds, ETFs, bonds, and closed-end funds. Although we incorporate principles that we firmly believe in, our approach to each client is customized to their needs and financial goals. When we design a portfolio for you, we will ensure it is tax-friendly. Why? Because taxes are your most significant liability. (You may have heard us say this before!)

Regardless, contact us today and discover why investing is for you. It’s your future, but we want to ensure you are financially prepared.