Average is pretty good

If you’ve actually heard the term “dollar cost averaging” before, then you’ve probably some experience in the world of investing — or at least have begun your research.

If this is new to you or you’re still trying to figure out what it is, let’s look at some names that might actually make more sense:

“The Kick Fear in the Face Approach to Investing”

“The Refusal to Time the Market Because That’s Cray Investing Strategy”

“The Buy Every Month and Don’t Worry About the Price Investing Strategy”

Okay, so maybe these terms don’t exactly clarify the meaning either, but at least they get to the heart of the matter.

Dollar-cost averaging is an investing strategy where you invest a fixed amount of money over a period of time so you don’t have to worry about buying into the stock market at the wrong time.

What’s the Deal With Dollar Cost Averaging?

Trying to make money through investing requires two things: buying in at a low price and selling at a high price.

Simple, right? Pay less, sell for more, turn a profit.

Of course, the term “low” or “good” as it relates to prices in the stock market are relative. Who’s to say what a good price even is?

That’s something most of us don’t discover until later after we’ve seen the value on our investments go way up (or way down). And those numbers can change on a daily basis.

Enter dollar cost averaging.

Developed to mitigate the risk of entering the stock market at the worst time. This strategy says forget about price.

Instead, simply buy in at the same time and amount every month and, eventually, the average price you pay will even out all the bumpy fluctuations that happened over the year.

It allows you to get off the stock market price roller coaster and instead, focus on things that actually matter.

Cash Is Still the Riskiest Investment

If you avoid the stock market because you’re afraid to lose your money, consider this:

Thanks to inflation, the value of cash will decrease over time. That means you need more money in the future to buy the same thing you could today, for less.

Even with the volatility of the stock market, historically it increases significantly over the long-term.

So if you’re keeping your entire life savings in a bank account, the value that your dollar holds (meaning how much it can buy) will go down over time, even as your savings increases.

If your goal is to invest but you’re nervous to do so, dollar cost averaging is the most user-friendly way to get your foot in the door.

At the end of the day if you have room in your budget to save money each month, getting some money into the stock market is better than waiting until you land on the perfect time or perfect strategy.

What to do when it gets volatile…

101119568-volatile stock charts.530x298

I hope everyone’s been having a fantastic year and today I’m going to share with you 2 Market Volatility Hot Tips.

During times of stress and uncertainty, Warren Buffett recommends keeping a level head. He recommends that buy-and-hold is still the best strategy.

I 100% agree.

Buffet also said, “If investors are trying to buy and sell stocks, and worry when they go down a little … and think they should maybe sell them when they go up, they’re not going to have very good results.”

Bottomline, as long as your investments are in alignment with your goals… stay away from your investment portfolio.

Here are 2 other tips to help you during market volatility:

1. Rebalance Your Portfolio
If there is a prolonged drop in the market, things get more complicated. Re-balance your portfolio when market volatility picks up. An unbalanced portfolio may mean you are taking on more risk than you think, or too little risk which may not be in alignment with your goals.

2. No Rash Short Term Decisions
When you have investment goals with time horizons of over 10 years, it is most likely best to do NOTHING. Consider the appropriate actions to take based on your financial plan and goals.

And like what American stock investor Peter Lynch says, “Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed.”

So there you have my 2 Market Volatility Tips. Hope they are helpful!

Maximizing Your Return in an Up-Down Market

grafiekomhoog_01There has been a lot of stock market volatility recently and people have been asking me what should they do with their investment portfolio. While no one has a crystal ball and everybody has their own specific situation, there are some general questions below you can ask yourself when the stock market gets a little choppier than normal.

1. Did the goal for the money change?
Maybe you’ve originally invested the money for the long term such as retirement, all of a sudden you change your mind and you actually need this money sooner. If so, then that may mean you need to change the strategy that you have for that money.

2. Did your risk appetite change?
Perhaps you started investing with a gung-ho attitude, believing you can take all the risks to get potentially higher returns. Then that changes and you don’t want to take on that level of risk anymore. This may be a reason for you to review your investment strategy and make some changes.

3. Is your money allocated in a diversified portfolio?
If you could honestly answer ‘yes’ to this question, that you know your money follows an allocation model and you are rebalancing the allocation on a regular basis, then you might not need to make any changes.

Again, everybody’s situation is different – you have different risk tolerance, different goals and different timeframe to hold on to their investments. You need to be aware of what your specific needs are when it comes to investing, do your homework and make sure you’re investing properly.

Simple Financial Tips That Can Make A Difference

tips2018 has certainly flew by and wow.. we’re going into March already? Perhaps now is a good time for us to do a stock-take on our money. Here is a couple of tips on how to keep more money in your wallet this year.

1. Don’t Do Mental Accounting When Building Your Budget
Mental accounting means the behavioural thinking of having different piles of money for different reasons. You might have a “jar” that says this is for emergencies or a vacation, and you’re putting money in there every month – at close to zero interest rate.

Then you also have a credit card debt. You mentally classify it as a different thing and pay your debt with income each month.

Financially, this doesn’t make much sense. Money is fungible, it really is all the same. You shouldn’t have a jar with money sitting in it that’s getting no interest or growth while you still have credit card debt.

The solution is to think about all your money as the same. People like to put cash in different buckets for different reasons, but that’s mental accounting and we need to overcome that hurdle.

2. Prepaying your mortgage
Some people add a little extra to their monthly payments to pay the loan off faster. This brings up a common question – is this a good use of the extra cash?

With current mortgage rates at under 4%, you should not be prepaying your mortgage. In fact, mortgages have really low interest rates and are designed for long periods of payments, and you should stick to that payment.

Prepaying it means you are giving up opportunity to use that money elsewhere – whether it’s paying off credit card debt or just investing it, putting it aside for retirement. If you’d be getting 8% returns on your long-term investments, why put your money in something that’s only 4%?

So from a financial planning standpoint, it’s not a good strategy. Nonetheless, people feel comfortable doing that. I know you want to feel like you’re paying off the house faster, but resist if you can.

3 Investing Myths Holding You Back From Success

investing mythsMany of us are interested in investing but have some concerns. Here are 3 popular myths that could be holding you back from investment success.

Myth #1 You can time the market
Timing the market is close to impossible. And studies actually show that a majority of the investment return that you are going to make over time doesn’t come from buying at the right time or selling at the right time.

But rather, it comes from proper asset allocation and diversification. So stop wasting your time trying to figure out when is the right time to buy and sell, day in and day out. Instead, choose a solid investment strategy, diversify your money and hold for the long term.

Myth #2 You need a lot of money to get started
This is one myth that holds a lot of people back. They think, “I’ll wait till next year when I have more money, then I’ll be able to dump a whole lump sum into the stock market at that time.”

No, it’s very difficult to do this. Instead, start with what you have even if it’s only $50 a month or $100 a month. Figure out how you are going to invest this amount automatically into an investment portfolio. Just set it up, so that it’s happening without you even thinking about it.

Myth #3 You can start next year
Time is absolutely critical when it comes to investing. The more time you have, the less amount of money you need if you are trying to achieve a certain nest egg amount at the end (e.g. retirement).

So if you have this myth holding you back, say “No, I’m not going to start next year. I’m going to start right now.” There’s no better time than now to start and catching up can be very difficult, if at all possible.

Hope you’ll understand now how to avoid these 3 investing myths, and be able to put into place prudent investment strategies and principles that over time, will maximise your income and assets so you could achieve long-term goals such as retirement with ease.