| The Power of Investing
Regularly
To reach most financial goals, you may have to invest diligently
for several years, if not decades. Regular investing through a strategy
called dollar-cost averaging can help keep you on track.
The principle is simple: Invest the same amount of money each month
or quarter, no matter what the market is doing.
Through dollar-cost averaging, you'll buy more shares when the
market is declining and fewer shares when it's heading up. In other
words, your average price per share may be lower than the market
average over that period.
Using Dollar-Cost Averaging...
| Month |
Amount
Invested |
Share
Price |
Shares Purchased |
| Jan |
$200 |
$12 |
16.6
|
--When prices are high, your investment buys fewer shares |
| Feb |
200 |
$10 |
20.0 |
|
| Mar
|
200 |
$9 |
22.2 |
| April
|
200 |
$8 |
25.0
|
--And
when share prices are low, your investment buys more shares |
| May |
200 |
$12 |
16.6 |
|
|
| Total |
$1,000 |
$10.20 |
100.4 |
|
| Market Value: |
|
$1,204 |
...vs. Making a One-Time Investment
| Month |
Amount
Invested |
Share
Price |
Shares Purchased |
| Jan |
$1,000 |
$12 |
83.4 |
|
| Feb |
0
|
$10 |
0 |
--You invest the
same amount of money but get 100 shares at $10.20 per share
vs. only 83 shares at $12 per share. |
| Mar |
0
|
$9 |
0 |
|
| April |
0 |
$8 |
0 |
|
| May |
0
|
$12 |
0 |
|
|
| Total |
$1,000 |
$12.00 |
83.4 |
--The result:
Your investment is |
|
| Market Value: |
|
$1,000 |
worth more because
your money bought more shares |
Although dollar-cost averaging can be a very effective way to build
your portfolio over time, you should be aware that it doesn't ensure
a profit nor prevent loss. You should also take a close look at
your financial resources and assess whether you'll be able to contribute
to your account on a regular basis. If you can manage to apply dollar-cost
averaging to even a small amount of money, consider doing so. Even
if you invest only a small amount on a regular basis, you still
will be working in a very disciplined that may help achieve your
goals.
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