Dollar Cost Averaging For Your Investments
Dollar cost averaging for your investments is important because you must find a way of keeping your costs similar across all investments that you make. You will find that you may make a similar investment whether a stock is expensive or not, and you will begin to control your money much better than you would have in the past. Consider how you will spend regulated amounts of money on investments rather than slinging your cash around with every new idea you come across.
What Is Dollar Cost Averaging?
You are planning to spend the same amount of money on a particular stock regardless of its price. This means that you have a budget for the investment, and you will not exceed that budget. You will plan to use the money you have set aside to buy from that company alone, and you will determine how many shares you buy because of your budget. A company with expensive stocks will yield only a few shares, but a company with cheap stocks will give you the chance to buy many shares. You are spending a dollar amount on a company and you don’t care about the amount of shares you get. This goes against the method people imagine stocks are bought, but it is much safer.
Why Do You Need Dollar Cost Averaging?
You need a way to start on a budget and stay on your budget. You will find that the average price you decide to spend may be recorded for that company, and you can easily calculate what your return will be. You are not planning to buy more shares in the future so much as you are planning to assign more money to this company.
Who Needs Dollar Cost Averaging?
Young and small investors will find that dollar cost averaging is a very investment plan. You may spend a certain amount of money on a company, and you will track the progress of that money until you are ready to sell or continue investing. You can clearly see what your returns are, and you are not over complicating the process. You do not get excited and buy more shares because you have committed to the budget you currently have.
How Do You Choose An Average?
The average that you choose will ensure that you have spent a worthy amount of money on each company. You can study these companies to learn how much you should spend, and you will find that you may use the average to assign an priority to a company, whether it be your best, or worst investment. A company that is not growing will have a low priority, but a company that could grow a lot has a high priority. You are simply using your research to set a basic budget.
To dollar cost average, you simply decide a dollar amount you want to spend on a company and you execute the trade. You do not buy 100 shares. You plan to spend $100 on the company. You will use dollar cost averaging to keep your money safe, and you will ensure that you have studied and invested in each company the right way.