If you’d like to lower your average cost per share, regular investing may help. When share prices are lower, your fixed investment amount will buy more shares. When share prices are higher, the same amount will buy fewer shares. The table shows how it may be possible to buy more shares at a lower average cost. Dollar cost averaging cannot assure a profit nor does it protect against loss in declining markets. Since this strategy depends on continuous investment regardless of fluctuating price levels, investors should consider their ability to continue making purchases through periods when prices are low.
If you look at your budget, chances are there are a variety of ways you can set more money aside. Here are just a few suggestions:
Cut unnecessary spending If you subscribe to magazines you never read or Internet Service Providers you no longer use, why keep paying? If you’ve stopped going to the gym, cancel your membership and invest the money.
Look at prices and labels Many generic items cost much less than their name-brand counterparts, but contain essentially the same ingredients. In other cases, buying in bulk may be an excellent way to reduce the cost of the items you regularly use.
Trim the extras Spending $2.50 a day on coffee may not seem like much. But if you cut out the extra cup before you reach the office, you could save $12.50 per week. Over 25 years, that could add up to $51,899 in a tax-deferred investment account earning an 8% annual return. Just imagine how much you could save if you brought your lunch to work!
Save on credit Many credit cards charge no annual fee, and if you’re paying for a gold or platinum card, it pays to ask if the "advantages" are worth the extra cost. Using cash instead of credit cards may reduce the amount of interest you owe.
