Remind us what dollar-cost averaging is again?
Sure! Dollar-cost averaging is when you invest a set amount on a regular schedule regardless of the share price. That means you’re consistently buying into the market and not trying to time the highs and lows of stock prices. It’s a disciplined and patient approach. The best part is that so many mutual funds have minimum investments of just $50 a month—and mutual funds offer instant diversification with a basket of stocks.
Forget the diet and the gym and resolve to get your finances in shape! That $10,000 you had in savings for the year is worth $10,100. Woo hoo! You made $100! I’m not knocking the $10,000 you kept in savings. That’s great! But if you’d invested the money in the S&P instead of keeping it at the bank, it would be $13,200. That’s $3,100 more—a down payment on a car or a swank vacation or just a significant addition to your long-term retirement goals.
Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.