Imagine everyone’s yelling useless advice at you. Now imagine shutting them all up.
That’s dollar cost averaging.
Let us explain.
We all know you can’t time the market. And by that, we mean you can’t know exactly when to buy the lowest low and sell the highest high. It’s been proven again and again and again. There will always be people who try, and every once in a while they’ll get lucky — but those blessed individuals are the exceptions that prove the rule.
So if we know this, what do we do about it? Dollar Cost Averaging. All that means is you spend your spending dollars over a long period of time so that you’re not affected by daily ups and downs of the market. It is the opposite of trying to time the market. You buy when it’s up, you buy when it’s down, you buy when it’s in the middle. And in the end, if the last 100 years of history is any guide, you come out ahead.
Dollar cost averaging is all about having a long-term plan
So when it feels like no one knows anything, remember what we do know: You can’t time the market, so stick with the plan.