This issue has been a contentious issue among investors about how to invest your money. Constant investment cost, Dollar Cost Averaging (DCA) is a strategy you can use to invest in the stock market in which you invest a sum of money from time to time. An example of this method is to invest $ 100 every paycheck to your investment account for retirement (IRA). This method is used extensively in retirement plans by the employer 401 (k) and 403 (b) and other plans where the taxpayer buys a certain amount of money ($ 100) regardless of the value of those shares, bonds or mutual fund . This helps a person to invest the time without having to wait to have a lot of money to do so.
Advantages
- You can invest without a lot of money at once, you can do with a small amount. There are many mutual farms do not charge you for investing in them with a plan automatically.
- As you invest your money in different periods, investing you protect all your money on a single date without knowing what will happen in the future.
- It will help you invest for the long term.
Disadvantages
- If the value of the stock or mutual fund increases, buy fewer shares. (But low buy more).
- If you are investing in funds that charge you for investment, you may be paying a lot of transaction fees. Therefore the DCA is more common in retirement plans and mutual funds.
Depending on how aggressive / to you in your investments, you can choose mutual funds that are similar to your ability to withstand market volatility. One place where you can open a mutual fund account and contribute a DCA plan is www.vanguard.com. If you have a retirement plan at work, I suggest you invest in an IRA or a Roth IRA because both have a tax advantage that can help you make more money.
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