Cost Averaging - It Makes Sense (Dollars & Cents)

It's no secret that the market goes UP...the market, goes DOWN. That's the basics of Investing 101.

For many of us the shape of the market day to day has about as much influence on our lives as the time of the tides that day. But for investors - especially first time investors - it can be a rollercoaster of heart racing highs and stomach churning lows. Every movement is being carefully reviewed and if it turns down then investors with itchy feet jump out.

If you know the benefits of investing, how can you avoid the stress of putting your hard earned money into the market?

Financial planners and investors are quite clear on the subject. New investors should not make an investment unless they are going to let it sit at least 5 to 7 years - the longer the better.

Why?

Well, the economy DOES move up and down, but we have never seen it bottom out (and if it did - well, you'd have much bigger concerns than your investment).

By selecting a diversified portfolio, such as a mutual fund, you can usually base your prediction on past activity and you'll see that in any 7-15 year period the investor always came out with more than he put in.

How do you take advantage of that? When should you invest?

Well, if shares were being sold for $10 each and you had invested $100 you would have purchased 10 shares. Now, if that is your whole investment you would be very upset if the value went down to $5, wouldn't you? Now your stock is worth $50. What would you do? Sell before it goes lower and loose $50?

Using the 'Cost Averaging' technique:

Cost averaging means you continue to put the same amount of investment into the market regularly - preferably every month. Now if you did that you would have invested another $100. At $5 a share you would buy 20 shares. Right now you have invested $200 but only own $150 worth of shares.

What happens when the price goes up?

When the price goes back up (and it will) it may stop at $8 per share. Now what? Well, you invest your next $100 and buy 12 shares.

You now have 42 shares valued at $8 each. That totals $336. Your investment was $300 so you just made 12% off of your investment.

Combining the cost of averaging with the 10% recommended for us to set aside for savings or investment - what's stopping you from jumping in?

Lucy Vestirian is the webmaster for http://www.fyinvest.com which is the premier invest site on the Web. Visit http://www.fyinvest.com to learn about different investment ideas and strategies

In The News:


pen paper and inkwell


cat break through


Trustee Fees: How Much is Enough and How Much is Too Much?

I am often amused by the ads and offers I... Read More

Five Straight Steps to Opening an Offshore Bank Account

Despite what you may have read or heard, anyone is... Read More

Clearing Blockages to Increase the Flow of Money into Your Life

Money is probably the most challenging thing for many people... Read More

Money Myths Of The Poor

From tender age, we were exposed to myths about money... Read More

Plan For Wealth

One very important wealth creating habit is to set up... Read More

Let Me Inspire You - You Aint Seen Nothing Yet! (PART-1)

You know about compounding right? You understand what pyramiding your... Read More

Increase Your Business with a New Old Method: Vaastu Shastra

Whether an established conglomerate or a fledgling company, a business... Read More

Why do Some People Rake in the Dough while Others Spin Their Wheels to No Avail?

Here's the truth: I have read hundreds and hundreds of... Read More

New Year Resolutions to a Better Financial Future

There could not be a better time to mull over... Read More

The Wealth Connection ? 2 Steps to Brighten Your Golden Years

Estimated Reading Time: 4 minutes -- Envision your life 10... Read More

High Flying Market Makes Good Buys Hard to Find

AS THE MARKET FLIES HIGHER, GOOD BUYS ARE BECOMING HARDER... Read More

Residual Income - The Myth

"Join our program and retire in 3 months..." yeah, right.We... Read More

Compounding: The Science Of Exponential Money Generation

It all begins with a simple calculation.You are home on... Read More

Your Own Products Can Make You Rich

Although there are advantages to selling other people`s products and... Read More

The 11 Best Money Saving Ideas of All Time - Part 4

At any time in history, no matter what the current... Read More

How To Get Investors And Bankers To Part With Their Money For Your Business

Time and time again entrepreneurs are losing out on getting... Read More

It Adds Up

Loose change that is, if you want a easy way... Read More

If You Know These 5 Wealth Secrets Then You Are Probably Already A Millionaire

Wealth Secret 1 - Decide Your Outcome Right Now.Unless you... Read More

Is Your Money Keeping Up With Inflation?

In today's unpredictable global economy, you obviously never know what... Read More

Principles to Ensure a Fantastic Financial Finish

Most people want to get to the end of their... Read More

Who Wants To Be A Millionaire?

Steve Martin once delivered an opening monologue for Saturday Night... Read More

The One Important Secret of Making More Money Easily

If you're reading this article, it means you are a... Read More

The Morphing of Thought and Cash

Here are some thoughts about the morphing of thought and... Read More

WARNING: The Biggest Lie About Compound Interest

Have you wondered why financial experts only tell you certain... Read More

The Parthenon Principle

Have you seen a picture of the Parthenon in Athens,... Read More

Your Wealth Cycle Foundation

The four main steps in building a wealth cycle foundation... Read More

Generate Savings with Smart Use of Electricity!

No matter what income level you are currently at, generating... Read More

Turbocharged Financial Planning

Financial planning is an ongoing process individuals and businesses should... Read More

The Philosophers Stone

"If you know how to spend less than you get,... Read More

The 11 Best Money Saving Ideas of All Time - Part 3

At any time in history, no matter what the current... Read More

Money Mastery

Money can be your servant or it can be your... Read More

Virtual Millionaire Strategy Exposed

Let's begin this lesson with a definition of the term... Read More

Thought Creates Reality Even When It Comes To Money

What if I told you that reading a book would... Read More