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It seems that recently, each day the stock market has greeted investors with either soaring gains or plunging losses. If the market is so volatile right now, why invest?
Consider dollar cost averaging,* an investment technique that merely dictates you continue to invest a certain amount systemically, regardless of what the market does.
Let’s say that in January, you decide to invest $200 every month in widgets. Your initial purchase price is $8, and you buy 25 widgets. In February, widgets go to $10 each and you feel good that you made some money, but in March, widgets start to tank, sinking all the way to $2 each. Human nature says you are losing everything – get out! Yet consider that when you go to the store and prices are low, you understand there is a sale and it’s time to buy. Keep this in mind when we tally things up.
If you sell right where you got in at $8, over 10 months (see graph) you’ve invested $2,000 and have accumulated a total of 461.66 widgets. You multiply your number of widgets by its value of $8 each and…you’ve ended up with $3,693.28! You’ve nearly doubled your money in a period when the market was down all but one month from when you started. How can this be?
You’ve made money because widgets went on sale during those low months. At $8 you bought 25 shares, but at $2 you bought 100 shares. You were able to buy more shares for less money, so you captured the market’s growth with a lot more shares as it returned.
Talk to one of our Wealth Management representatives to identify your appropriate risk levels and learn how you might invest now. Schedule a no-obligation appointment online or by calling 360.891.4093.
*This plan does not assure a profit and does not protect against loss in a declining market. Such a plan involves continuous investment in securities. Investors should consider their financial ability to continue their purchases through periods of all price levels.
Securities are offered through Financial Network Investment Corporation, a registered broker/dealer and Member SIPC. Financial Network is not affiliated with Columbia Credit Union or its subsidiaries. The Financial Network Registered Branch is located at 3003 NE 62nd Ave. PO Box 324, Vancouver WA 98666.
Not NCUA/NCUSIF Insured • May Lose Value • Not a Deposit • No Credit Union Guarantee
Not Insured by Any Federal Government Agency.
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