Dollar Cost Averaging your way up!


Dollar Cost Averaging also Called DCA is a really good way to protect yourself from violent shifts in market direction(up or down suddenly). DCA involves basically buying a fixed number of shares over the long term in certain amounts. For example, say for instance stock (A) cost 10.00 per share. You put 50.00 dollars a month towards buying stock (A). As the share price goes up you scale back(a little) on how much you contribute to buying Stock (A) which is 10.00 per share. If the share price goes down from 10.00 to say 5.00 per share you buy more. You buy more shares(at a fixed amount) because you know that what comes down, will eventually go back up again.

When it goes back up, the value of the shares will be worth more in the long run. In laymen terms, buy low, but keep buying at a fixed amount no matter if the market is up or down. That way you keep your losses at a minimal if markets fall, and you have more in value if the markets rise.

Most people try to time the market(pull out all money when market falls, put in money when market rises) which can actually hurt you because no one knows when the market is going to go back up and you run the risk of not getting all of the returns that happen when the market rises.

Its definitely not hard to do, all it takes is a little discipline and asset allocation to make it happen!!

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