A powerful way to build investment confidence

1. Consider the dollar cost average

Say you have a lot of money to invest. Maybe it was an inheritance or a gift. Or maybe you found $ 50,000 on your couch cushion (hey, what if?). If you are very risk averse, one of your first thoughts is “What if I invest all this money at once and the market goes down right after?” If that sounds like you, the dollar-cost average can bring you some peace of mind.

Dollar-cost averaging means buying a certain dollar amount of a certain investment over a certain period of time, regardless of the value of its shares at each interval. Since you are investing the same amount every time, you will automatically buy more shares when the price is low and fewer shares when the price goes up. This can help you avoid potential buyer regrets when prices are at their highest. Growing investment is one way to help you get comfortable with the normal movement of the market and it can be especially helpful for self-identified concerns.

2. Auto save

Some investors worry that they are not saving enough to reach their long-term goals অথবা or that they are not doing enough to keep their financial lives on track. By determining your savings in autopilot you can get some of that uncertainty out of the equation. Keep a percentage of each salary or your annual salary in your investment accounts. You’re taking positive steps to stay on track – and it’s a great feeling!

3. Diversify your investments

Diversifying your portfolio is one way to control risk. This is a fancy way to describe laying your eggs Lots Basket বা or in this case, your money in high, moderate, and low risk investments, both domestically and internationally. Your portfolio will still have the potential to grow from high-risk stocks, but you won’t be so weak during a market downturn because you’ll also ideally keep safe investments like bonds and cash. The breakdown of stocks, bonds and cash in your portfolio determines how much risk you will take when you invest and you have the freedom and flexibility to choose a mix that feels right for your life.

4. Think long term

Successful investing is not about responding to today’s news or being the latest trend on social media. It’s about guiding your financial choices to your long-term goals. That’s what inspired you to invest in the first place! In times of instability you may be tempted to pull your money out of the market. But if you do that and reinvest when the markets are calm, you can go further away from your goal. Why? Because your investment loses the ability to compound. And while a measurable, orderly investment method is not always easy, in the end it can be worth it.

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This hypothetical example does not represent any particular investment, nor does it account for inflation. “Cost” represents both the amount paid in the expense as well as the “opportunity cost” – the amount you lose because the costs you paid are no longer invested. There may be other material differences between investment products that should be considered before investing.

Remember: Strong financial planning is made keeping in mind the volatility of the market. If you diversify your holdings, invest regularly, and focus on your big picture goals, you can feel confident that you are doing your part to set your portfolio for success and set yourself up for your ongoing financial well-being.

Important information

There is no guarantee that any specific asset allocation or combination of funds will meet your investment objectives or give you a certain income level.

All investments are at risk, including the potential loss of money you invest.

Diversity does not guarantee gain or protect from loss.

The dollar-cost average does not guarantee that your investments will be profitable, nor will it protect you against losses when stock or bond prices fall. You should consider whether you are willing to continue investing during a long downturn in the market, as it involves continuing to invest without fluctuating the average value of the dollar-cost.

21 2021 The Vanguard Group, Inc. All rights reserved.

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