Financial Expert Marion G. Cuff, CFS : Dollar Cost Averaging


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  • Marion G. Cuff, CFS



If you haven't started investing towards a long-term goal because you're worried about short-term market volatility, consider using a popular investment strategy called dollar cost averaging. Dollar cost averaging takes some of the guesswork out of invest


How does dollar cost averaging work?

To illustrate how dollar cost averaging works, let's say that you want to save $3,000 each year. To reduce the risk of buying when the market is high, you decide to invest $250 in a mutual fund each month. As the following chart shows, this approach can help you take advantage of fluctuating markets because your $250 automatically buys fewer shares when prices are higher and more shares when prices are lower.

If you calculate the average market price per share over the 12-month period ($141 divided by 12), the result is $11.75. However, if you calculate your average cost per share over the same period ($3,000 divided by 259 shares), you'll see that on average, you've paid only $11.58 per share.

Putting dollar cost averaging to work for you

You may not realize it, but if you're investing a regular amount in a 401(k) or another employer-sponsored retirement plan via payroll deduction, you're already using dollar cost averaging. In fact, you can use dollar cost averaging to invest for any long-term goal. It's easy to get started, too. Many mutual funds, 529 plans and other investment accounts allow you to begin investing with a minimal amount as long as you have future contributions deducted regularly from your paycheck or bank account and invested automatically.

If you're interested in dollar cost averaging, here are a few tips to help you put this strategy to work for you:

• Get started as soon as possible. Once you've decided that dollar cost averaging is right for you, start investing right away. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizeable investment account over time.

• Stick with it. Dollar cost averaging is a long-term investment strategy. Make sure that you have the financial resources and the discipline to invest continuously through all types of markets, regardless of price fluctuations.

• Take advantage of automatic deductions. Having your investment contributions deducted and invested automatically makes the process easy and convenient.

IMPORTANT DISCLOSURES Working with an advisor that holds the CFS designation does not guarantee investment success. Securities and Investment Advisory services offered through FSC Securities Corporation, Member FINRA/SIPC and a Registered Investment Advisor. The Grace Financial Group is a marketing designation.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Marion G. Cuff, CFS
128 Seneca Lake Road, Sparta, NJ 07871
973-729-9861
Ask Marion G. Cuff, CFS a question.
www.TheGraceFinancialGroup.com

Let Marion show you how to grow your wealth, preserve your assets, and leave a legacy because it's not only about managing your money; it's about living your life.




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