Dollar cost averaging is yet another way your employer-sponsored retirement plan holds you down.
Each pay period, you are investing the same amount of money (your contribution) into the same investments. Let’s say one share of one of the funds you are invested in is $100 per share (In real life, it’s definitely cheaper than that but just rock with us for a sec). So, if the cost of one share is $100 and you make a $100 contribution, then you are buying one share. What if the next pay period the price drops...by 50% (again, market volatility is never this dramatic but we want to use nice, round numbers). This means that your $100 can now buy two shares.
Who doesn’t love a sale? When prices fall in the stock market things are on sale. This is the same for your retirement plan.
Relax and stay calm. You're invested for the long-term.
Have a great weekend Savvies!
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