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In this article we’ll explore the concept of Dollar Cost Averaging (DCA). Even if you start late, we all want to just finish rich. DCA is a tool to help you be successful in this tough market by maximizing the value of your investments. If you want to buy low, sell high and preserve your portfolio, DCA continues to pay.

So…what do you know about DCA?

Dollar Cost Averaging, as opposed to Lump Sum Investing, is one of many tried and true investment strategies. Its purpose is to invest equal monetary amounts regularly over specific periods of time (say $100 monthly) with your portfolio. When successful, more shares are purchased when prices are low, and fewer shares are purchased when the price is high. DCA’s goal is to lower the average cost per share of the investment, giving the investor a lower total cost for the shares purchased over that period of time, and helping them make more money.

As an example, let’s say you decide to purchase $100 worth of ABC LLC each month for three months. In July, ABC is worth $33, so you buy three shares. In August, ABC LLC is worth $25, so you buy four additional shares this time. Finally, in September, ABC LLC is worth $20, so you buy five shares. In total you’ve purchased 12 shares for an average price of roughly $25 each.

It’s been said that DCA has a psychological appeal, when the market dips you get a better deal on pricing, and when the market goes up, people are happy regardless. What do you think?

Keep your chin up high, and always stay true to your investment techniques. Good techniques can be the difference between making money, and breaking even. Which side are you on??