How do you take advantage of the market?⠀⠀
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There is a quote I find helpful in answering this question.⠀⠀
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“It has been amply demonstrated that a monkey with a hand full of darts will do as well at choosing stocks as most highly paid professional managers. – Andrew Tobias “The Only Investment Guide You Will Ever Need”⠀⠀
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The answer is, you can try to take advantage or time the market, and you likely won’t succeed. I think what is great about having very little money overall is you can buy a couple of stocks and try for yourself. Occasionally you succeed and end net positive, most often you do not. Ultimately, it is a great lesson to learn early on in your investment strategy so that you don’t make the same mistakes when you have a lot more money riding on your decisions.⠀⠀
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Dollar cost averaging is how Braden and I take advantage of the market! It is a strategy where you invest at regular intervals, regardless of the market price on the stock. By purchasing the stock at regular intervals, this removes the work of trying to time the market because you buy at both highs and lows. For Braden and I, this means investing $500 into each of our Roth IRAs with our second paycheck of the month.⠀⠀
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If I was attempting to time the market, I would be really upset that the market is down 12%. Instead, I don’t really care because 1) I’m a long term investor 2) I’m dollar cost averaging so this brings down my purchase price when I buy now and 3) it’s been proven that despite drops, the market rallies higher with time (which is why its good to be invested in the market because it partly covers inflation).⠀⠀
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I think its important to learn these lessons when we don’t have as much money riding on our decisions. If you want to try to time the market, feel free to buy a few stocks and see how you fair! Then when you realize you are just like everybody else and are not very good at it, you can switch to dollar cost averaging.⠀⠀
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Have you heard of dollar cost averaging? What is your investment strategy?