Should you invest in one lump sum or on a monthly basis?

Written by on 2012-10-10 10:49 AM in , , , . It has 0 Comments.

There are many questions people have about investing and investments.  What should I invest in?  When should I invest?  How aggressive should my investments be?  Those are all best answered with the help of your personal financial planner, who can help you determine what your goals are and how to achieve them.

Plunging into any investment can be nerve-racking.  Some options are relatively simple while others are complex, but here is where Dollar Cost Averaging could help you weather market storms.

What is Dollar Cost Averaging?

Dollar cost averaging refers to purchasing a fixed dollar amount of an investment on a regular schedule (usually monthly) – regardless of unit price. More units will be bought when prices are low, while fewer units are bought when prices are high. By continually investing a set amount of money, dollar cost averaging often lowers the average share price paid as the market changes throughout the year.

Benefits

  • Starting off slow

    As an investor, it can be worrisome to invest a large lump sum at one time. That’s why dollar cost averaging can be a good strategy – because for many of us it’s easier to come up with smaller investment amounts more often.

  • Minimize Risk

    No one knows when the market will rise or fall, there is a risk of investing at the wrong time. Dollar cost averaging can protect you from market swings. Spreading your investment over time ensures marketplace surprises don’t hit you all at once. Even if you’re an experienced investor, dollar cost averaging gives you the opportunity to try riskier investments a little bit at a time.

This type of investment plan may not be the best for everyone.  That’s why Erb and Erb’s Financial Planning experts will help you create an investment plan that fits your goals and budget.

For more information please visit our financial planning page here.

Thanks for reading.

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