Here is the second installment drawn from an excellent BlackRock piece in Shareholder magazine, headlined Command Your Financial Future, which features three “time tested pieces of investment advice.”
Rule No. 2
“Focus on time ‘in,’ not timing.”
“Identifying the ‘best time’ to invest is difficult, or even impossible, particularly in highly volatile markets. The more prudent course is to make fixed purchases at regular interviews, regardless of short-term market direction. In this way, each dollar buys you more shares of an investment when its price is low and fewer shares when its price is high. Bonus: you remove the emotion from the decision-making.
“Over time, this strategy (better known as dollar cost averaging) can produce a lower average cost per share and a higher return than a single lump-sum investment or emotion-driven market timing. Dollar cost averaging does not ensure a profit or prevent loss; nothing does. But it does help to take advantage of price fluctuations and to weather market gyrations in smaller doses as you diligently pursue your long term goals.”
Next up: “Double down on diversification.”