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Follow on Google News | Tiptoe Into a Cool Pool of MoneyDollar cost averaging (DCA) money into a volatile stock market can reduce risk exposure, while positioning an investor for an upswing in the stock market.
By: Shawn Loring, CEO | Generations Financial Services The Big Plunge (a.k.a., a never-mind-the- With the Tippy-Toe approach, in contrast to the Big Plunge, the swimmer cautiously enters the pool, slowly acclimating to the water temperature. An investor of this type, like the swimmer testing chilly waters, prefers to gradually, systematically invest securities into the stock market to provide the necessary time to assess and analyze how the stock market is trending. Dollar cost averaging (DCA) is this investor’s equivalent of the tiptoe into the pool. DCA enables an investor, who expects the stock market to eventually correct, but simultaneously anticipates volatility in the short term, to invest without fear. What is Dollar cost averaging? DCA is the systematic practice of purchasing securities at planned, precise intervals with predetermined sums of money. This technique of investing reduces the investor’s exposure to the risk involved in committing assets to one massive purchase of securities. With DCA’s methodical investment schedule, an investor purchases more shares at a lower rate, which reduces the stress involved in investing in a volatile market. It is true that the possibility exists that the investor will not buy all of their shares at the absolute bottom, which would maximize the shares purchased. However, guessing when that absolute bottom share price will hit is highly speculative, and, thus, risky. The cautious investor should leave this guessing to the investor willing to take the Big Plunge into pool. By employing DCA an investor can tip-toe into the water slowly instead of taking a big plunge. The above article was created by the professionals at Generations Financial Services. They can be contacted at info@generationsfinancialservices.com or at 800-260-1615. Generations Financial Services, Inc./SagePoint Financial, Inc. branch 44350: 660 Veteran Ave. #321, Los Angeles, CA 90024. Securities and investment advisory services offered through SagePoint Financial, Inc., member FINRA/SIPC and a registered investment advisor. Generations Financial Services, Inc. is not affiliated with SagePoint Financial, Inc. or registered as a broker-dealer or investment advisor. Past Performance cannot guarantee future results. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. Periodic investment plans do not assure a profit or protect against a loss in declining markets. Such plans involve continuous investment in securities regardless of fluctuating price levels. # # # Generations Financial Services is a full service firm dedicated to helping individuals and companies achieve their long term financial goals. End
Page Updated Last on: Jul 16, 2009
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