Strategy above average
Q: I really want to invest, but markets seem so up and down at the moment and as a result, I am quite hesitant to invest. Do you have any advice on when is the best time to do this? Anton - Dalkeith A: Not even the world's best economists know when markets are heading up or down, so choosing the best time to invest is notoriously difficult.
But if you really want to invest, there is a way to safeguard yourself from investing your money at the worst possible time: it's called dollar cost averaging.
Dollar cost averaging is a very simple strategy with a lot of power. Basically, all you have to do is invest a set amount of money at regular intervals, for example $1000 at the start of each month.
This takes the stress out of trying to time the market by smoothing out your investment over time.
So while one month you may buy $1000 worth of shares at $10 each, the next month it could be $9.50, and the next month $9.
This means you mitigate the risk of buying all your shares at an inopportune time.
With this strategy, you can quit worrying about investment prices day-to-day and chopping and changing your plan based on investment tips from neighbours and taxi drivers.
And the best part of it is that you'll buy more shares when prices are low and fewer when price are high.
Dollar cost averaging cuts out the emotional element to investing, replacing irrational spur-ofthe-moment decisions with a thoughtful longterm investment plan that will see you building wealth consistently over time.
With market volatility high, now may be the perfect time to use the strategy. on Designing Wealth