Most everyone has heard the term “dollar cost averaging” (DCA) as a way to invest money into the market. Unfortunately, there is much misunderstanding about the topic including the validity of the process.
Let’s look at an example of DCA. Lets say you just inherited $20,000 and you decided to invest it in the stock market. Once you have determined a proper asset allocation (mix of investments appropriate for your risk tolerance, risk capacity and goals) you could invest it all at once or do “dollar cost averaging” into the securities by purchasing a set dollar amount of securities at …Read More