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Money Talks: Here's an Investing Strategy You Should be Following

You should be doing this type of investing, especially if you're paid monthly, bi-weekly, or weekly.

TEMPLE, Texas — Many people don't start investing because they fear that they won't be able to ‘time’ the market effectively, and they will lose money. 

Luckily, when saving for retirement there is a basically fool-proof strategy, and it gets implemented for you automatically by your employer. This week's ‘Money Talks’ explains what this tip is. 

“Dollar Cost Averaging” simply means that as you get paid over the weeks, months and years, you invest a portion of your paycheck and the purchase comes each time you get paid, meaning you get the current value of that investment.

"Dollar Cost Averaging is a strategy in which you take a set amount of money and you invest it in an asset over a period of time," Financial Investor Rolandus Johnson explained to 6 News. "It's also known out there for those as D-C-A. It's called D-C-A."

D-C-A means that if the market drops, you are actually buying your investment at a sales price. Over time when those investments rise in value, your profits can be fantastic, as ‘Rojo” further explains. 

"Dollar Cost Averaging is one of my favorite strategies, especially for beginner investors," said Johnson. "And to kind of bring it back real world, my real-world example will be your 401k or your retirement account sponsored through your job. You're putting money away every month, or every week, or every two weeks or however you're paid and then the money's going to be invested in a set amount of assets set up inside of that program."

Just a reminder, if you are paid in company stock or into your company's fund, you'll want to rebalance that investment in most cases to some of your “Set it and forget it funds,” so that you won't have to worry about it in the future. 

"What it allows you to do is almost advance it or secure your investment on auto pilot," Rolandus told 6 News. "Then it becomes one of those things where you kind of forget about it. And so, in my practice with our beginner investors we always say, 'hey, let's just take a hundred or two hundred or three or whatever that amount is and put it on auto pilot and we'll get it invested over time.' Great strategy and I absolutely love it! "

And again ‘Dollar Cost Averaging” is good because it keeps you consistent as well as prevents you from trying to time the market -- which investors tend to do during ‘Bear Markets' more so than 'Bull Markets'.

‘Rojo’ had a tip for all of us saying, "We say in the advisor world, “Time IN the market and not timing the market,” and so what dollar cost averaging allows you to do is give you a lengthy amount of time in the market and, I’m going to be honest with you, I haven't seen anybody with a great amount of time in the market fail."

Of course, the opposite of “Dollar Cost Averaging” is lump sum investing. When choosing to invest in that fashion, diversity is important so that a sudden change in the market won't hurt your position too badly. Anyone saving for a retirement is pretty much in the D-C-A camp!

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