Dollar-cost Averaging: The best way to invest
THUNDER BAY – Money – I am always asked what the best way to invest is. Most people I run into tell me they like to wait until they have a lump sum before they invest it. Truth is averaging in weekly, bi-weekly or monthly will provide the best results over the long term. This strategy entails investing the same amount of money every month to ensure you buy more units when the prices are low, and few when the prices are high, thus reducing your average cost. This can also be done easier by setting it up so it’s automatic and pre-authorized contributions.
Benefits to Dollar-cost Averaging
The other benefits to dollar-cost averaging other than averaging in your price is that your money is invested for a longer period of time which is likely to earn a higher rate of return than a savings account, thus maximizing your potential return. This will also leave you less likely to spend that money, rather than if you just leave it in your savings account to spend on something you may not really need.
Here is an illustration of what putting $100/bi-weekly or per pay cheque can look like over many years.
The Bottom Line
It doesn’t take a lot of money to start something that could turn out to be great. You just need a plan that works, and the patience to stick with it over the long run. I hope this helps you understand that the hardest part in making a plan like this happen, is just getting started.
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Anthony M. Talarico
Financial Security & Investment Representative
W: 807-343-4788 C: 807-472-6092