Dipping Your Toe in the Stock Market

Warren Buffet once said it’s better to look for a great stock at a good price, rather than a good stock at a great price. Having said that, don’t try to “time” the market – instead, invest level amounts at regular intervals (dollar cost averaging). Over 10-20 years you’ll do about as well as the stock pickers who buy at precisely the right moment...and you won’t lose your shirt in the process

Many people use dollar-cost averaging without even knowing it, by sending regular monthly checks to their mutual funds or money market accounts. The theory is that by investing a fixed amount at regular intervals, you will sometimes buy shares at a low price and sometimes at a high price, but that over a period of time, the average cost of the shares will be less than if you purchased them all at a time when the price was high.

Dollar cost averaging works well when you are dealing with cash that you receive periodically, such as a paycheck, dividends or interest. If you have a lump sum to invest, from an inheritance or retirement distribution, for example, you might hold the funds in some other investment and withdraw amounts slowly to buy stocks or shares in a mutual fund.


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