3. Dollar-Cost averaging can reduce the risks of investing in stocks and bonds.
Dollar-Cost averaging simply means investing the same fixed amount of money in at regular intervals over a long period of time.
Ex 每年投資$1000，在不穩定的市場跟穩定上漲的市場比較圖
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investor are elated when stock prices rise and depressed when they fall. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer singing prices.
Ex 最初放$500, 之後每個月$100投資在Vanguard 500 Index mutual fund. $39,000 -> $265,000.
If possible, keep a small reserve (in a money fund) to take advantage of market declines and buy a few extra shares if the market is down sharply...
For the stock market as a whole, Newton's law has always worked in reverse: What goes down has come back up.
For those in their twenties, a very aggressive investment pro folio is recommended. At this stage, there is lots of time to ride out the peaks and valleys of investment cycles.
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