This blog post was originally posted on the Public app on 9/22/21. Click here to view follow me on Public.com.
A Little Goes a Long Way?
A little does go a long way, I’m all for a quick buck but in the stock market, little amounts tend to go very far over time.
Dollar-cost averaging is the practice of investing on a set schedule (daily, weekly, monthly), or investing a set amount of dollars or shares. It works because when you combine a set investment schedule with a steady investment amount, you maximize your chances of getting the best stock price and minimize your chances of losing a huge chunk of your free cash.
When you DCA, you also can have your cake and eat it too and that means you can invest in a stock while saving cash for new buying opportunities. In my case, I do an Extreme DCA, I invest $1 a day in Amazon and it’s going to take me 11 years to get a whole share. Obviously, I’m not rich or in a hurry, but it allows me to buy a $3,000 stock while keeping cash free to buy whole shares of other exciting stocks.
Sounds crazy, but I did it to prove a point similar to your inquiry, “a little goes a long way”. I could have just purchased a whole share or invested $50 a month but I like keeping an eye on Amazon and like being able to buy other things while I wait for my whole share.
As far as dollar-cost averaging goes, it’s a great strategy that helps to turn your little bit into a lot over time.
Dollar-cost averaging is a friend of the wise and the BFF of the frugal because of that reason. So, if you are investing on a budget, trying to grow your wealth, or only have a set amount of funds, DCA allows you to get more bang for your buck when compared to a single large buy and hold.
⚠️Warning: This is not investment advice.