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Savvy Investors Pay Themselves First
Many people use automatic monthly deductions from their checking accounts to make sure their bills are paid on time. But paying yourself first by making regularly scheduled deposits into your investment accounts is just as important.
One investment technique called “dollar cost averaging” is designed to potentially reduce the risk that can occur with a single lump-sum investment. With this approach, you commit to systematically applying a fixed amount of money to your
investment(s) at regular intervals.
How Does Dollar Cost Averaging Work?
Using dollar cost averaging, more is purchased when prices are low and less is bought when prices are high. This approach reduces the risk of a significant loss from a single, lump-sum investment (should the market dip shortly after you make your investment). Spreading your investment purchases out over time allows you to take advantage of the market highs and lows. Ask your representative to help you understand the details of dollar cost averaging and to help you decide how much and how often to invest in order to give your retirement income the most growth potential.
It´s important to remember that dollar cost averaging does not guarantee a profit or protect against loss in a declining market. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.