Riding the Wave

With a stock market that seems to churn every day, yet still hover close to a record high, it may seem impossible to know whether to buy or sell. I say don’t worry about it! If investing for the long haul, use a dollar cost averaging strategy to ride the dips and peaks. If it’s time for that regular, recurring investment, go ahead and make it, regardless of the current market.

Dollar cost averaging is simply investing a fixed dollar amount on a regular basis, regardless of share price. The opposite of dollar cost averaging is market timing which is holding those investments to try to catch a low point in the market to buy or a high point to sell.

I’ll concede that dollar cost averaging can be a little scary in a bearish market when it seems, there is no bottom to the drop in share prices, or when the market is bullish, reaching milestones such as we’ve seen recently. Regardless, in my humble opinion, dollar cost averaging remains the most effective way to invest one’s hard-earned dollars over the long haul.

The secret to dollar cost averaging is less about knowledge of the market (I am living proof of that) and more about life choices. The first question one may ask is how much should I invest to make this strategy work? A better question than how much is “how often”. Bottom line, to invest and grow wealth within a reasonable amount of time, let’s say 20-25 years, one needs to invest as much as they can, but more importantly, with regular recurring frequency.

Assuming income steadily increases over the years, a worker will most likely hit an acceptable standard of living. Anything left over is the answer to the question “how much” to invest. Important to note, the “acceptable standard of living” milestone could come or go at multiple touchpoints in life. It is ok to throttle back dollar cost averaging as long as there is a personal commitment to throttle the recurring investments back up when income increases.

Although it sounds fancy, dollar cost averaging is just the age-old strategy of putting away what’s left over each week/month/year into investments with a disciplined recurring frequency. More importantly, dollar cost averaging is overcoming that temptation to put that hard earned money into frivolous wants or worse, living above means. Without investing using a dollar cost averaging strategy over the span of one’s earning years, reaching financial freedom will be a challenge.

Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!

Interested in rental property investing? Look for Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing on Amazon to learn how our family turned rental property investing into a successful side hustle!

Look for, Being Frugal, a Truth to Build Wealth, coming to Amazon in early 2025!

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