Dollar cost averaging is a system whereby you invest a fixed amount in an asset at a regular interval. The intent is to buy more of that asset when its price is lower. This permits you to obtain a lower average price than if you bought a fixed quantity of that asset at each interval. Continue reading Investing for Retirement: Dollar Cost Averaging
Even if you aren’t a history buff, you should have a basic understanding of financial history so that you aren’t surprised by ‘unexpected’ financial downturns. When these downturns inevitably occur, you will be able to stick to your long-term financial plan. Limiting your research to just the past 100 years, financial history evidences significant volatility for both stocks and bonds. Using recent history as a rough guide, you should assume that similar downturns will happen again in the future, even if you don’t know exactly when they will happen.
Continue reading Investing for Retirement: Recalling the Lessons of History
Time is transformational. The longer the time that you hold your investments, the closer your portfolio’s actual returns will approximate their expected average. If your investment time is short, then higher return investments may be too risky due to variation in your actual returns. But, if your investment time is long-term, then you can consider higher-return, riskier investments because the variation in your actual returns will be closer to the expected average. Continue reading Investing for Retirement: Time
But in the long run, whether for an individual stock or the total stock market, the market return must equal the investment return. Speculative return becomes statistical noise. Basic economics governs. Therefore, you do not need to forecast the speculative return; you only need to compute investment return. Continue reading Investing for Retirement: Return
Risk and reward are inextricably intertwined. In the long run, you are compensated for risk. But, don’t expect higher returns without higher risk. And don’t expect safety without correspondingly lower returns. Continue reading Investing for Retirement: Risk
What is most important is not the dollar amount but the purchasing power of the money that you save. In other words, what your savings will buy when you retire. Expect inflation to destroy the purchasing power of your savings almost as fast as you build wealth, depending on your asset allocation. Continue reading Investing for Retirement: Compounding, Inflation & Real Returns
Contents Overview Defining Your Investment Objectives Building Your Net Worth by Budgeting, Saving & Investing Compounding, Inflation & Real Returns Controlling the Costs of Your Investing Risk, Return & Time Market Risk Other Types of Risk Longevity & Mortality Risk Health Risk Event Risk Tax & Policy Risk Investment Return Time Recalling the Lessons of History Predicting the Future Financial Market Efficiency The Efficient Market … Continue reading Investing for Retirement: Table of Contents
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