FEAR & GREED | Business News Ask Fear & Greed: How does dollar cost averaging work?
May 30, 2025
Discover the intriguing concept of dollar cost averaging in investing! Learn how this strategy allows for consistent investments over time, helping to mitigate risks. Delve into its connection with financial decisions, like managing mortgages, and uncover the importance of seeking professional financial guidance. Don't miss the insights and practical advice shared by the hosts!
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Dollar Cost Averaging Explained
- Dollar cost averaging involves investing a fixed amount of money at regular intervals instead of a lump sum.
- This strategy helps average the purchase price and reduce downside risk over time.
Applying Strategy to Mortgages
- Sean Aylmer applies a similar risk spreading strategy to his mortgage by splitting repayments between fixed and variable rates.
- This personal example shows how dollar cost averaging principles can apply beyond equities.
Long-term Investing with Dollar Cost Averaging
- Investing through dollar cost averaging over many years helps systematically build wealth while spreading risk.
- This method reduces the impact of market fluctuations for long-term investors, especially younger ones.