Finance Tip Friday #41: Dollar Cost Averaging

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It is impossible to time the market. No one truly knows WHEN our economic markets will have a downturn or when they will surge. You can read “predictions” all you want from financial experts, but at the end of the day they are taking an educational guess. Did you know that 9 times out of 10 their predictions are wrong? Therefore, don’t listen to financial analysts and their “predictions” on the economy. It is a fool’s errand and does not guide you well.

Instead, focus on CONSISTENT investing. Regardless of what the market is doing, you should always be investing a little money into your investment portfolio on a monthly basis (if possible). This is called dollar cost averaging. You do not want to invest large chunks at a time because you have been sitting on mounds of cash in your bank accounts.

Dollar cost averaging means that you are investing a fixed amount of money on a regular basis into various investment vehicles, regardless of the price.

Studies have shown that people who dollar cost average vs. invest large amounts of money at one time OUTPERFORM those that invest the large amounts or try to time the market.

I personally dollar cost average my stock market investments as well as my real estate investments.

Every month, I invest a fixed amount into my post-tax stock market brokerage account.

Every month, I invest a fixed amount into my self-employed IRA.

Every month, I invest a fixed amount into my real estate down payment savings account. Once I hit a certain amount in there, I then look for properties. Rinse and repeat.

By dollar cost averaging, you become a DISCIPLINED investor. You deploy your cash, so it WORKS FOR YOU on a regular basis vs. just sitting in the bank.

As a nurse practitioner entrepreneur, you SHOULD be generating a healthy income, so if you are living within your means, you SHOULD have some left-over money every month. Therefore, get disciplined and put that money to work for you. Invest it on a regular basis. Pick any amount that you are comfortable with and begin investing it MONTHLY. After a few years, you will be AMAZED at your results. I guarantee it.

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