Wednesday, August 29, 2007

Dollar cost averaging with a kick

I dollar cost average. Every week, I buy some investments. But, when there is a big down day in the market, like yesterday (DOW down 280 points), I take my dollar cost average purchase list and purchase a big bulk of each item. So I'm still dollar cost averaging but they kick is increasing the amount in between when there are very low days. I think it should work well over the long term because the dollar cost averaging levels out the purchase prices but on down days you can almost be assured you are getting a bargain. So you reduce your risk while maximizing gain potential and it helps you stay focused on your long-term goals and also actually makes you excited about down days. Being diversified helps too because you can guard against massive losses you might take in a single stock which can be emotionally devastating.