Dollar-Cost Averaging (DCA)

I’ve spent a lot of time this year, developing my investment strategy for the stock market.

I’ve researched what economic sector we’re in based on indicators.

Reviewed how the market has performed as a result.

Monitored businesses I am interested in investing in.

Looked at the technical charting as well.

And just when I feel like I am ready to pull the trigger, I don’t.

I don’t put my money where my mouth is because I’m scared.

What if there’s a piece of information I am overlooking?

What if the economic landscape changes?

What if a recession hits?

What if I don’t get the best price for my shares?

The second guessing was petrifying, and I couldn’t make a move (figuratively, I’m moving just fine 😊).

But, it’s funny how the universe works.

Scrolling through the CNBC app, I noticed a video talking about the principle of Dollar-Cost Averaging (DCA).

Dollar-Cost Averaging (DCA)

DCA is an investment technique of buying a fixed-dollar amount of a particular investment on a regular schedule, regardless of the share price.

The investor purchases more shares when prices are low.

And fewer shares when the prices are high.

This takes the pressure out of trying to buy at the absolute lowest market value or getting a bad deal by buying at the peak of the share price.

DCA places the emphasis on your investment strategies, and not making a quick buck.

If you’ve done your research and you wholeheartedly believe the company you’re investing in is a winner. Stick to it.

If you’re willing to pull out of an investment after a bad week or so, you probably had no business investing in it in the first place.

Practical Example

Let’s use Wal-Mart (WMT) as an example.

As of 10/16/18 WMT is currently trading at 95 dollars per share.

You’ve done your research, WMT balances sheets and income statements look good, you like the direction they’re going.

You want to buy.

“Jeez Eric, $95 is only going to get me 1 share, I can’t afford to by many.”

Plan to set aside 100 dollars a month to purchase the stock anyway.

The stock goes up to $117 when it’s time to buy? That’s fine. Roll it over to the next month.

Stock drops to $50? Even better. Buy two shares.

Month 1 = $95 per share = Buy 1 share

Month 2 = $109 per share= Don’t Buy

Month 3 = $87 per share = Buy 2 shares

Month 4 = $74 per share= Buy 1 share

Month 5 = $100 per share = Buy 1 share

You now own 5 shares at the average cost of $93 per share.

I used to feel so ashamed for not having an exorbitant amount of capital to put in the market.

With this method, not only can I own equity in the company, I can start at a pace that fits my risk tolerance.

Can’t do 100 dollars a month? Change it to $100 a quarter.

I know some of the ridiculous things you buy within the year.

You can’t put away $100 a quarter to buy a share?

It’s time to change the narrative.

Stocks become out of reach because we aren’t proactive about growing wealth.

Slow growth is still growth nonetheless.

Conclusion

Everyone has heard stories of people who lost their first $1,000 or so in the market starting out.

They call it “taking their lumps” to get experience.

I was deathly afraid of being that person.

But people generally lose money in the market not doing their due diligence.

Not planning, not having an enter and exit point.

Trust your research.

Trust the risk fits your tolerance level and execute.

Scared money don’t make money.

Weather Your Storm, Maintain Inner Reign -E

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