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Evan M. Haines, CFP®, ChFC®, RICP®
Financial Advisor
Prudential Advisors
222 Independence Street
PO Box 632
Perryopolis, PA 15473
Phone: 724-736-2130
Email: evan.haines@prudential.com
Trying to predict the market isn't usually a recipe for success. In contrast, a slow and steady investing approach may help you use market fluctuations to your advantage as you invest for long-term financial goals. Dollar-cost averaging* can play a part in this approach.
For example, you might contribute $100 twice a month to your retirement account, putting $50 into equity investments and $50 into fixed income. If each share were, say, $1, then you would buy 50 shares of one asset and 50 of the other.
Buying the same dollar amount of any investment doesn't, however, mean you are buying the same amount of each investment's shares each period. When stock prices rise, you get fewer shares for your $50. So, if stock prices double to $2 per share, you would buy 25 shares. And if fixed income shares declined to 75 cents a share, your $50 would buy almost 67 shares. In other words, you buy more securities with declining prices and fewer whose price has increased.
Dollar-cost averaging takes the emotion out of investing, providing a way to maintain a consistent investing approach regardless of short-term volatility, with an eye on longterm goals.
* Investing regular amounts steadily over time (dollar-cost averaging) may lower your average per-share cost, but this investment method will not guarantee a profit or protect you from a loss in declining markets. Effectiveness requires continuous investment, regardless of fluctuating prices. You should consider your ability to continue buying through periods of low prices.
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