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The Importance of Dollar Cost Averaging
The Importance of Dollar Cost Averaging
Buy low, sell high – who doesn’t want to? Unless you’ve got a crystal ball, it’s impossible to time the market. Rather than attempting to do so, using dollar-cost averaging may lower the average cost per share.
With dollar-cost averaging, you agree to automatically invest a set amount of money each month – $50, $100 or more. Your money is then invested in one or more mutual funds, which your Thrivent Financial representative helps you select based on your financial goals and your tolerance for risk.
Sticking to this type of disciplined investment plan month in and month out, may help you reap rewards, which could include:
- Buying fewer shares in up markets. When the market is higher, you buy fewer shares.
- Buying more shares in down markets. When the market is lower, you buy more shares.
- Lowering your overall cost basis. By purchasing more shares when the market is down and fewer when the market is up, you may end up buying more shares when the cost is lower, driving down the average cost per share.
No mutual fund investment strategy guarantees success, but by using dollar-cost averaging over the long term, you may increase your chance of reaching your financial goals.
To learn more about successful investing and how Thrivent Investment Management can help you achieve your financial goals, contact a Thrivent Financial representative today.
Take advantage of dollar-cost averaging
Here’s an example of how dollar-cost averaging works. The example features three strategies: investing $400 at the exact low point of the market, investing $400 at the exact high point of the market and investing $100 each month as part of a dollar-cost averaging strategy.
| Month |
Buying Low |
Buying High |
Dollar-Cost Averaging |
Month 1—
Share price is $50 |
0 shares |
8 shares |
2 shares |
Month 2—
Share price is $20 |
20 shares |
0 shares |
5 shares |
Month 3—
Share price is $20 |
0 shares |
0 shares |
5 shares |
Month 4—
Share price is $40 |
0 shares |
0 shares |
2.5 shares |
| RESULT |
You own 20 shares worth $800 |
You own 8 shares worth $320 |
You own 14.5 shares worth $580 |
Dollar-cost averaging does not ensure a profit, nor does it protect against losses in a declining market. Because dollar-cost averaging involves continuous investing, investors should consider their long-term ability to continue to make purchases through periods of low price levels.
Investing in a mutual fund involves risks, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the fund which investors should read and consider carefully before investing.
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Investing in a mutual fund involves risks, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the fund which investors should read and consider carefully before investing. To obtain a prospectus contact a registered representative or visit www.thrivent.com. |
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