Investing on a Budget: Dollar Cost Averaging

With a challenging economy and dim job market, many people are looking for ways to earn some supplemental income.  If that additional income can be made from home, without having to take on a second job, that’s a big plus.  For many, investing seems like the perfect solution.  Though it’s far from risk-free, it can be done from home, work, or the beach – anywhere you have internet access.

If you have done much research at all, you have found several companies that will offer you low fees per trade. Low fees are great, but many of these same companies require a $500 minimum investment. Not everyone has that kind of cabbage sitting around, and most of us would find something to spend the money on if it was just sitting there. Another option is to invest by committing a small amount on a monthly basis.

This type of investing is called ”dollar cost averaging.” With this method an investor can spend as little as $100 each month and has the option of buying stocks, mutual funds, or annuities. Fees are nominal, 2 percent with a $5 minimum fee per month, per item purchased. The benefits of investing this way are many.  They include:

  • Being able to set a monthly budget.
  • Automatic withdrawal from your account.
  • Being able to accumulate shares by buying whole and fractional shares each month.
  • Dividends are automatically reinvested.
  • Usually results in lower fees over the life of your account.
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If you’re looking for a relatively low-risk method of investing, this could be the way to go.  By investing on a monthly basis you do not strain your willpower or budget, yet you can potentially take advantage of market fluctuations, buying more shares when the price is down and fewer when it is up. The automatic withdrawal can be stopped at any time, so if you lose your job or are simply tight on money one month, you can use the money somewhere else, then restart the investment the following month. The low start-up costs make the barrier of entry to this type of investing about as low as can be.  Of course, if you don’t invest very much money, you can’t expect to earn a lot, but the learning process could be hugely valuable.

Dollar cost averaging is a smooth process that can be handled by most brokerage firms. While the program may have a different name from firm to firm, if you call your local office and describe what you are interested in, you should be able to start right away.

This article has been provided courtesy of, a leading provider of auto financing services for US consumers.

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