Ashley Temer is a Financial Representative with Northwestern Mutual who helps professionals, families, and business owners plan for financial security. She’s here for your “Money Minute.”
There’s an adage in investing by low and sell high. It makes perfect sense. The problem is that pulling it off is basically impossible. While some investors go all-in on a stock or fund and invest a lump sum of money in one fell swoop, others use a strategy known as Dollar Cost Averaging.
It simply means investing in smaller increments of cash in a stock or fund periodically to build a position over time. Dollar Cost Averaging can smooth the impact of volatility. Because markets rise and fall unpredictably, it can be difficult to time markets. Saving this way means market declines are an opportunity because your contributions will buy you more shares. This strategy also helps investors avoid another common pitfall; timing the market.
Waiting for the market to drop or recover before jumping in could leave you on the sidelines for months or years. Remember, time in the market beats timing the market.