PREVIOUS: Fundamental Analysis

# Dollar Cost Averaging: The Easy, Low Risk Investing Strategy

## Dollar Cost Averaging

Investing in the stock market involves a lot of unpredictable factors. So many first time investors get scared off by not knowing what stock(s) to buy at what time. Timing the market is a daunting task, but thankfully there are strategies that take timing out of the investing equation.

Dollar Cost Averaging is an investment method that mitigates the risk of timing the market by dividing up initial investment over time. The concept is simple. Rather than trying to buy low and sell high, the investor picks a fixed incremental dollar amount to allocate over time.

### Dollar Cost Averaging Example

For example, Investor A wants to invest \$5000 in stock XYZ. He decides to buy 100 shares at the current price of \$50 per share. His friend, investor B decides to buy \$5,000 of stock in the same stock, but \$1,000 at a time on the first day of the next five months (dollar cost averaging).

Stock XYZ Prices:

Month 1: \$50

Month 2: \$45

Month 3: \$40

Month 4: \$48

Month 5: \$52

Month 6: \$60

By month six, Investor A has \$6000 with a \$1000, or 20%, net return. Investor B however, has a total equity of \$6,437 for a net return of nearly 29%. Investor B took advantage of the changes in price in order to net greater returns by splitting up his initial investment over time! By fixing a dollar amount invested per month, Investor B was able to buy more shares at lower prices and fewer shares at higher prices.

Not satisfied? Let’s take a look at a real stock: Tesla.

### Dollar Cost Averaging in Real Life

#### Tesla June 15, 2018 – October 29, 2018

Investor A decides to invest a lump sum of \$50,000 into Tesla on June 15th, 2018 at a price per share of \$354. Investor B also decides to invest \$50,000, but in increments of \$10,000 on the 15th of each month.

June 15: \$354

July 15: \$312

August 15: \$342

September 15: \$289

October 15: \$260

Current Price: \$333

At the current price, Investor A has actually lost money. His initial investment of \$50,000 is now worth only \$47,034. However, Investor B, who bought \$10,000 worth of Tesla stock on the 15th of each month now has \$54,146 for a net positive return of 8.3%.

While no investment method is foolproof, dollar cost averaging lowers risk for investors with long term investing goals. It’s not going to get you rich quick, but it is a smart way to make the most of changes in stock prices over time. Try dollar cost averaging with your Wall Street Survivor virtual portfolio today!

### BEST STOCK NEWSLETTER for the last 5 Years (July 24, 2021 UPDATE)

#### One of last year's Motley Fool Stock Picks is up 648% and 6 others have already doubled!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's over 5 years and over 120 stock picks. As of July 24, 2021, 19 of their 24 stocks picks from 2020 are up with an average return of 93% compared to the SP500's 41%.

In addition, their 2019 stock picks are up 126%; their 2018 stock picks are up 253%; their 2017 stocks are up 223% and amazingly their 2016 stock picks are up 462%. The Motley Fool has done so well because they have quickly identified stocks each year that will perform well in the current environment. They adapt and constantly pick stocks before everyone else realizes the opportunities. Now they are starting to pick stocks that will do well in the post-Covid world and Biden presidency.

• Fiverr Intl (FVRR) - Sept 3, 2020 pick is up 75% in just 3 months
• CrowdStrike (CRWD) – June 4, 2020 pick and it is already up 74%
• Zoom Video (ZM) – April 16, 2020 pick and it is up 172%
• Shopify (SHOP) – April 2, 2020 pick and it is up 204%
• Zoom Video (ZM) – March 19, 2020 pick re-recommended and it is already up 301%
• DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 15%
• NVTA picked February 6, 2020 is up 129%
• Tesla (TSLA) picked January 2, 2020 before the crash and it is up 596%
• HubSpot (HUBS) picked December 5, 2019 and it is up 152%
• Netflix (NFLX) picked November 21, 2019 and it is up 59%
• Trade Desk (TTD) picked November 7, 2019 and up 368%
• Zoom Video originally picked Oct 3 and it is up 433%
• SolarEdge (SEDG) picked September 19, 2019 and it is up 204%

Now, no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super profitable. They also claim that since inception, their average pick is up 596% and now we believe them. Many analysts are saying that we have passed the bottom of this COVID crisis and "certain" stocks will recover quickly and be the new leaders. So make sure you have the right stocks in your portfolio.

Normally the Fool service is priced at \$199 per year but they are currently offering to new subscribers for just \$99/year if you click this link

Here is their release schedule of their upcoming stock picks:

• December 1, 2022 - David's New Stock Recommendation
• December 8, 2022 - Tom's List of 5 Best Stocks to Buy Now
• December 15, 2022 - Tom's New Stock Recommendation
• December 22, 2022 - David's List of 5 Best Stocks to Buy Now List

So if you have a few hundreds dollars to invest each month and plan on staying invested for at least 5 years, we haven't found any better source of stock picks. When you subscribe, you also get full access to all of their recent picks.

CLICK HERE to get the next 24 Motley Fool Stock Picks for just \$99!