Consider Dollar Cost Averaging
We all know we should buy low and sell high,
but determining when that occurs is difficult. Thus, consider
using a strategy like dollar cost averaging to help with those
decisions.
Dollar cost averaging involves investing
a set amount of money in the same investment on a periodic basis.
For instance, instead of investing a lump sum in one stock immediately,
you might invest $2,000 in that stock at the beginning of every
month.
Utilizing this strategy can provide several
benefits:
- Dollar cost averaging requires the discipline
to invest consistently, regardless of market fluctuations. Thus,
it reinforces the habit of regularly setting aside money for
investing.
- For many investors, one of the more difficult
aspects of implementing an investment strategy is deciding when
to invest. Fear of investing at a market high can keep investors
waiting on the sidelines. With a dollar cost averaging program,
you just follow the plan and invest on a periodic basis, without
trying to time the market.
- Since you are investing a fixed amount
of money, you purchase more shares when prices are lower and
fewer shares when prices are higher. Thus, your average cost
per share is typically lower than the average market price per
share over the same time period.
- Since you are spreading your investment
over a period of time, it keeps you from investing all your money
at a market high.
Dollar cost averaging, however, does not
ensure a profit or protect against loss in declining markets.
Before starting a dollar cost averaging program, you should consider
your financial ability to continue purchases through periods of
low price levels.
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About David K. Sebastian
David K. Sebastian, CFP®, and his team of experts at The Physicians Wealth Management Group specialize in working with individual physicians and group medical practices. David is considered to be one of the top financial advisors in the country with more than twenty five years of Wall Street experience as a chief investment officer, portfolio manager, institutional bond trader, and estate planning, benefits planning and retirement consultant.
Commitment to his clients’ financial needs and well being is a primary motivation for David.
The Physicians Wealth Management Group was specifically created to address and manage all of the unique financial challenges that doctors are facing both individually and through their group medical practices.
Feel free to contact me at
www.physicianswealth.com or
dsebastian@sfr1.com
or call me at (973) 285-3600
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