So the entire goal of becoming a successful investor is to be good at tipping the odds in your favor. So just when you invest and how often you invest could make a big difference.

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1. Simple Definition
– Einstein said, things should be as simple as possible but no more than that
– This means I will make this as simple as possible to explain
– Dollar-Cost average is you trying to lower the average price you paid for an investment ( that’s it )
How do you do this:
– Well for the average person investing into index funds this is going to be vital
– Because human nature says, when things are good you be optimistic and when things are bad you have to be pessimistic
– However humans are humans and its not going to be simple, so you need a strategy that helps take control

Because overall:
– When the market is on a bull run, a lot of things become very expensive and overprice ( so if you buy at an all-time high, and then market crashes, you could be stuck waiting 12 months or 12 years until the market recovers back to what it was )
– And during a bear market, when people are not investing, it means things become very cheap to own. ( so you should be buying a lot more )
– However, the problem is, that not everyone is a value expert ( so the dollar cost average rule helps a lot)

2. How I implanted it into my investment strategy
– Before using the rule
– I would save a lot of money and invest it all at once or invest when I had extra money
– This could have led to a massive problem when the market would crash

But today here is what I do:
– Dollar-cost average is you trying to lower the price you paid for your investments
– So instead of investing a lump sum of money and buying it all at ones
– I just started to invest 20% of my income each time I got paid which was weekly ( and doesn’t matter if the market is up or if it’s down )

Here is why:
– If the first 6 months of 2021 we have a bull market and spend 26 weeks investing 20% of my income
– And then the market crashes, but I keep investing the same 20% for another 26 weeks
– At the end of the year I would get an average price for the investment ( and when the market recovers I will be back on paste very easily )

However:
– If I invested just for 26 weeks of a bull good market
– That means I would have had to wait until the market recovered back to its peak
– But because I bought at the bottom to, when the market recovers I will have some nice gains

Tip: basically if you want to do dollar cost average, you have to invest the same amount of money each week, bi-weekly or monthly ( whether it’s a good market or a bad market )

3. However there is one more thing you need to know
– Rebalancing your portfolio and investing a lump sum of money and how to do it

Now let’s say:
– You are investing 20% of your income but still have a large junk of money on the side
– And the market just crashed 30-50% ( it has to be a big dip )
– And you have an extra 50k to invest ( how do you invest it )

The answer is: you use Drip investing
– Meaning because you don’t know how far down the market will recover
– You can invest that 50k over a 1 month or 2 month period
– So for example 50/4 or 50/8 and some people even invest it over a 12 month period if they really think things will get worst

I did this during march and invested 20k over a 3 week period

However:
– If you do dollar cost average monthly keep in mind that every 18 months to 12 months you will have to rebalance your portfolio
– This means if you wanted 80% stocks and 20% bonds but now it’s out of wack
– You’ll have to invest more to bring back up or sell securities and buy the opposite one

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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