| |
Cost Averaging... It Makes Sense (Dollars & Cents)
By Yvonne Volante
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?
About the Author
Yvonne Volante 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.
Article Source: http://www.simplysearch4it.com/article/10436.html
| If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/10436.html" as shown above and make it hyperlinked. |
| Some other articles by Yvonne Volante | Some Basic Tips On Using Your Camera
It's true that taking photos is as simple as running out and grabbing a cheap five dollar camera. But taking good, quality photos has never been easier. So lets explore some quick ideas that can ...
Be The "Envy" Of Your Neighborhood And Lower Your Fuel
Have you heard about the ENV yet? It's pronounced like "envy" and stands for Emissions Energy Vehicle.
After many years of testing, Intelligent Energy of London has developed a motorcycle-like vehicle that ...
Small Aircraft Control Surfaces
Anyone who has held their hand out of a car into the wind to play airplane already has a fundamental impression of control surfaces on the airplane.
When the ...
Is The Use Of "Pay Day" Loans Wise?
Could pay day loans be the answer consumers with low bank accounts have been looking for? Is there any harm in using these services? ...
Flying As A Hobby
Ask a room full of people what hobby they have and you will get as many answers as there are people. Others will confess that they don't have ...
|
|
| |
|
|
|
