Financial Freedom

Demystifying the Dollar Cost Average

As a mom and a wife, you always want the best for your family. The best food, best clothes and in some way the best return on our investments. A best rate on the investment means getting closer to financial freedom.

Getting the best rate of investment is dependent on so many factors such as the type of investment, the economy etc. One of the concepts that I keep hearing about is the dollar cost average. What is it? How can this help me with my investments and in getting me to reach that oh so tempting goal of financial freedom.

Think of it this way, so you got a bonus from the company you put some money in your 401 (k) and you have some left. Well should I spend the money buying something I deserve? or should I slowly and steadily invest chunks of that money in say the select fund or better yet should I invest the whole amount in the select fund.

The steady investment is what is connected to the dollar cost average. The whole amount refers to the lump sum investment. 

There are benefits to both types of investments. The whole idea around the investment is to buy low. Chances that you are going to buy low are higher with the dollar cost average. Chances that you may not are higher with the lump sum investment.

The dollar cost average is low risk with lower returns and the lump sum amount is higher risk but higher returns.

So I hope this has helped somewhat with demystifying the concept. Which method have you used and what has worked with you?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s