Dollar Cost Averaging: How to Play the Long Game When it Comes to Your Retirement

  • With all of this volatility, should people just pull out of the markets?
  • What is dollar cost averaging and how does it actually work?
  • What about gold?

The stock markets have been volatile since August. But, don’t panic. The market has started to recover, but how does the average person handle this? Dollar cost averaging involves either easing into the markets or easing out of them, rather than determining where the absolute top and bottom are. Dollar cost averaging helps you avoid all of the noise, and involves you committing a dollar amount or a percentage in fixed intervals, regardless of what the market is doing. This forces you to do the right thing; which is when the market is down, you’re buying more.

Les Szarka is a Certified Financial Planner and a Chartered Financial Consultant. He is co-author of Money Talks: Life Lessons to Help You Plan Now, Save Wisely, and Retire Well. He is also author of Money Brain: How Your Subconscious Mind Can Hijack Your Investment Decisions. He likes to refer to himself as a “financial psychologist.”