Dollar Cost Averaging Investing A relatively stress free investing strategy By Mo2

Dollar Cost Averaging Investing
Dollar Cost Averaging is one of the most talked about investing strategies around and it has good reason for its popularity. This low risk low hassle investment strategy is great for an investor that has a stock they like but doesn't have much time to look for optimum timing for an entry. Besides even if you did have the time timing an entry is extremely difficult.

Tops and bottoms
To apply the dollar cost averaging strategy to your investing, first choose a stock that you want to invest in. Then instead of investing a large amount at once, divide your investments over time so that your entry will be at different prices. This way you can average out your entry prices and thus avoid investing at tops although you do miss investing at bottoms.

Even for professional traders it's very difficult, if not impossible to exactly pinpoint tops and bottoms in markets. Therefore with this strategy you don't have to look for the best entry and can enter whenever you want to. This also means that you don't have to be watching the market constantly to time your entry which is great for the average investor who doesn't have the time and luxury to watch the markets but still want to invest in the market.

Here is an example of dollar cost averaging investing.
Stock: MSFT (Microsoft Corporation)
Price (at the time when this article was written): $31.00
Buy 100 shares of MSFT @ $31.00 = $3,100.
2 months later MSFT drops to $28.00.
Buy another 100 shares @ $28.00 = $2,800.
Another 2 months later price rises falls again to $24.50.
Buy another 100 shares @ $24.50 = $2,450.

Total: 300 shares
Average Price: ($31.00+$28.00+24.50)/3
= $83.50/3
= $27.83 per share
Despite the current market being at $24.50, the $27.83 per share is much better than the original $31.00 giving the investor a better chance to make the most of his money and come out with a profit.

Invest and relax
I particularly like this investment strategy, as I'm sure many do because it takes the risk and stress out of investing. Yes, if you do want to know if I use this strategy in real life, I do. Of course, this isn't risk free. If you choose a bad stock and it goes out of business, then you're stuck and you probably bought the stock all the way down. But, if you're looking at the longer term and invest in more stable stocks then you have a great chance to succeed. Just remember to always you do your homework.

 

Mo2 Thinks...
Investing shouldn't always be a stressful thing. Depending on what strategies you employ to your investing it is possible to make investing relatively stress free. This strategy won't work all the time you need to think about what you're investing in. I would employ this strategy on a stock that has shown it's stability over time, blue-chip stocks would be a great example. Hope this helped, happy investing!

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