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401(K) 2012, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons

Dollar-cost averaging is a simple investment strategy. Through dollar-cost averaging, investors put the same amount of money at regular intervals (monthly, quarterly, etc.) in order to build wealth over time.  Brokerage firms have made dollar cost averaging even simpler with partial share purchases. Dollar-cost averaging is a way for investors to continue to put money into the market despite market conditions. 

Here are some steps you can follow to build wealth using dollar cost averaging:

  1. Set up automatic investments: You can set up automatic investments with your brokerage firm or bank. This will allow you to invest a fixed amount of money at regular intervals without having to worry about timing the market.
  2. Choose your investment: You can choose from a variety of investment options such as mutual funds, exchange-traded funds (ETFs), or individual stocks. It is important to choose an investment that aligns with your financial goals and risk tolerance. Choose an investment with low fees. 
  3. Stick to your plan: It is important to stick to your plan and continue investing at regular intervals regardless of market conditions. This will help you avoid making emotional decisions based on short-term market fluctuations. The whole point of this strategy is to invest at the interval you have decided upon and not try to time the market.
  4. Rebalance your portfolio: Over time, your portfolio may become unbalanced due to changes in the market value of your investments. Especially if the investments you choose for dollar cost averaging are a few individual stocks or a sector ETF. It is important to periodically rebalance your portfolio to ensure that it remains aligned with your financial goals and risk tolerance. If you choose a S&P 500 ETF rebalancing may not be as necessary.
  5. Monitor your progress: It is important to monitor your progress and make adjustments as needed. This will help you stay on track and achieve your financial goals.

In order to keep the strategy simple and include diversification many investors choose an ETF which tracks the S&P500.   Here a link to a Forbes article with six different ETFs.  Some of the ETFs listed track the performance of the S&P500 while others track a sub-index of the S&P500.  Make sure you know what you are investing in.  Also make sure to look at the expense ratios.  The expense ratios vary from 003% to .02%.  As the article indicates … In cases where expense ratios are higher, check to see if the fund’s performance justifies the higher management fee.

 

Best S&P 500 ETFs Of July 2023 – Forbes Advisor

 

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