Many investors stop contributing to their investment portfolios due to market volatility, naturally trying to avoid losses. Will this knee jerk reaction help you reach your long-term investment goals? By not pausing your contributions, you will harness the power of Dollar cost averaging.
Dollar cost averaging is a popular investment strategy that involves investing a fixed amount of money at regular intervals, regardless of the market conditions. This strategy can have several advantages for personal investment portfolios.
Firstly, dollar cost averaging can help to mitigate the impact of market volatility on your portfolio. By investing a fixed amount at regular intervals, you are able to buy more shares when prices are low and fewer shares when prices are high. This means that you will be less likely to buy all your shares at a high price and then experience a significant loss if the market falls.
Secondly, dollar cost averaging can help to instil discipline in your investment approach. By investing a fixed amount at regular intervals, you are less likely to be swayed by short-term market fluctuations or emotions such as fear or greed. Instead, you can focus on your long-term investment goals and remain committed to your strategy.
Finally, dollar cost averaging can help to reduce the overall cost of investing. By investing a fixed amount at regular intervals, you can take advantage of the natural fluctuations in the market and potentially buy shares at a lower average cost than if you were to invest a lump sum all at once.
Overall, dollar cost averaging can be a useful strategy for personal investment portfolios. By mitigating the impact of market volatility, instilling discipline, and potentially reducing costs, this strategy can help to increase the likelihood of achieving long-term investment success.
Ruvan J Grobler RFP™
*The above only serves as factual information and not as financial advice.