I have created more wealth through dollar cost averaging than I ever could have otherwise.
I made lots of investment mistakes when I began. The common wisdom is to buy low and sell high, but how do you do that when the market is on a tear and everything is expensive? You hoard money, wait for a recession and hope that you time the market perfectly when you buy in and sell at the perfect time that the stock skyrockets in price. That is a pipe dream. And who has time to do all of that with a family and a full time job.
Even the people who have the full time job of that do not do a great job of it.
I made a terrible mistake when I began my investment journey. I say that oil stocks where doing great and they paid a high dividend so I chose a stock and put $5,000 on it. Everything I had. And then swiftly the price of a barrel of oil cratered and the oil company quickly went out of business. Lesson learned. I was never going to purchase energy stocks again, because I don’t know anything about the oil market and I was never going to bet on one company.
Luckily I made smart investments to make up for the stupid one like investing in Facebook and Apple during 2008.
A lot more people talk about buying and selling rather than talk about dividends. Dividends are where the magic happens.
Ok what is dollar cost averaging?
It is the practice of consistently purchasing a set amount of stock over time. No matter what the price of the investment you just keep purchasing.