This week’s TikTok defines what Dollar Cost Averaging is as well as gives an example of how it might work.
Dollar cost averaging is the practice of investing a fixed amount in a given time period (Monthly, Quarterly, etc.) and buy more securities when they are cheaper and less when they are more expensive.
The video breaks down the math, but the idea of Dollar Cost Averaging is that as markets fluctuate you can keep your average cost low. This helps investors buy the dip in a strategic way and eliminates FOMO (Fear Of Missing Out) by purchasing just a little of up trending stocks.
Buying the Dip has become almost a meme over the past couple years, but essentially it has the same sentiment as Warren Buffet’s quote “Be greedy when others are fearful.” There are many ways to build wealth and this is just one of them, but I did want to highlight this as an alternative to blindly buying down-trending stocks.
As always, please, do your own research before making any investment decision or speak to a professional. If you have any questions please feel free to reach out to us and we would be happy to assist.
