Everyone knows telling the future is impossible. What will happen tomorrow or even five minutes from now just isn't something anyone can know for certain. But there is a way to take advantage of this particularly volatile market without trying to predict coming events or whether the market will go up or down. It's called Dollar Cost Averaging.
The concept is an old one. It works like this: every month, you set aside the same amount of money to invest in the market, and then you buy certain stocks each month. That way when the market is higher, you buy fewer shares. When the market is lower, you buy more shares. When you calculate the overall cost of your position, it will be highly influenced by the larger number of lower priced shares.
Let's say you can commit to investing $500 a month into the market. The first thing you need to do is open a stock brokerage account. You can do that online. Then send in your first $500 and let it sit in your account earning interest while you do your homework. Pick 9 stocks, each in a different industry. Then start buying as many shares of three of those stocks the first month that your $500 will buy. The next month you buy more of those same three stocks on the same day or close to the same day. Remember, you're not trying to time the market. You're building a position of nine good stocks. In the third month, you buy more of the same three stocks.
Now you've got three separate prices for each of the three stocks. Some shares will be higher than the average, some will be lower. You need to keep your confirmation slips so you know exactly what you paid for each stock. Simply by adding up the three different confirmations and dividing that total dollar amount by the number of shares for each stock, you can determine your average cost for that particular stock.
During the next three months, buy another three stocks, different from the first three. Stay with those stocks for three months. Then buy another three stocks for another three months. Finally, you can start adding once again to your original three, if you want or you can pick another three. The important decision is to have the discipline to buy every month and to have a diversity of stocks.
Once you start on this program, you'll be impressed with how it helps your well being. You won't care if the market is going wild at the moment if you're a long term investor. This way of investing will let you take advantage of these turbulent times, establish a strong portfolio of stocks, and enable you to sleep better, no matter what the market is doing.
This is such a great time to start one of these programs because so many stocks are selling at extremely low prices. The key is to buy the stocks that are strong with increasing earnings or that have more cash in their bank account than the value of the stock, if that stock has a promising future. While $500 may not sound like a lot to invest, it still will buy over a 100 shares of some big names in technology, bio-tech, and other out of favor industries. Don't miss this opportunity in the market. In fact, take advantage of it but in a prudent way.