With inflation at levels not seen in 40 years, stocks falling into bear market territory, and the U.S. economy contracting for two straight quarters, investors were searching for strategies to invest during these volatile times.
Dollar-cost averaging, simply put, is a systematic way of investing a fixed amount of money regularly. It’s often used to describe the way most people invest, on a paycheck-by-paycheck basis, through workplace 401(k) and 403(b) plans.
By buying and holding, investors believe that they are likely to earn long-term investment returns despite whatever short-term market volatility may come their way. They think an extended time horizon allows them to ride out short-term dips in the market.
Investors try to gauge how close or far they are from their goals because your time horizon determines how you invest. For instance, a younger investor may have a portfolio that’s heavier in growth stocks and lighter when it comes to bonds and cash.