There’s a common misconception that you need a large amount of money in order to invest in the stock market. Consider that myth busted. In fact, with a simple investing technique known as dollar cost averaging, almost anyone can start investing – and keep investing over time – with very little money up front.
Easy investing for everyone
What is dollar cost averaging? It’s pretty simple, actually. Start with a modest sum of money, say $100. (Possibly even less – many firms will let you set up an automatic investing plan for as little as $50 a month). You use that money to buy as many shares of a given stock, bond or mutual fund as you can. The next month, you do the same. You may be able to automatically deduct the amount from your bank account each month, so you won’t even have to think about it.
Over time, as you continue to make your $100 monthly purchase, your investment can start to add up. The price of each investment may rise and fall, meaning your monthly purchase will buy fewer shares in some months, and more in others. Over time, your average share price may be lower than if you had invested a large sum all at once.
Slow and steady can win the race
With dollar cost averaging, you can always increase your monthly stock purchase, if your finances allow it. But even if you keep your monthly purchase the same, your portfolio can grow – especially if you invest consistently over a long period of time. Stick with it and you could watch your initial, modest investment grow into something more substantial. Keep in mind, of course, that all investments have risk and even dollar cost averaging can't guarantee a profit or prevent losses in declining and volatile markets.
This material is provided for general and educational purposes only; it is not intended to provide legal, tax or investment advice. All investments are subject to risk. We recommend that you consult an independent legal or financial advisor for specific advice about your individual situation.
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