Monday

Scared of the stock market? Try dollar cost averaging!

The stock market is a scary place to invest your money these days, however there really isn't much of an alternative with fixed income paying almost nothing so what to do?

I suggest selling your stock mutual funds or etf's when you are feeling very uncomfortable or giddy with your investments and then jumping right back in via dollar cost averaging.

Dollar cost averaging is the process of buying on a regular basis or in increments so as to ideally get a good average price and dollar cost averaging works well with the volatility that we have been witnessing lately.

Sure you may miss out on some of a rally but you may miss out on some of the downturn too?!  This strategy is not for everyone and does entail some fees but bottom line is that it'll keep you in the stock market to some extent and keep some of your sanity as well.

Of course, if you have any questions, remember that I am a money coach and am happy to answer questions or concerns you may have.  Email me at scott@howtheinvestmentbusinessreallyworks.com.

Thursday

Investment Myth That More Risk = More Return

Some investment myths continue to persist no matter what the reality is and most investment myths are dangerous to your financial well being.

Here is an oldie but a goodie!

More risk = more return.  The notion that you need to take on more risk to get more risk just isn't true.  I know it sounds like it ought to be but it is not.  Over the last decade or so, bonds have outperformed stocks.  Obviously bonds have risk but certainly less than stocks yet they have outperformed.

Smaller cap stocks are always tauted as the answer to higher returns and indeed the data appears to bear that out however upon closer examination, you will see that only a handful of small cap stocks do extremely well and skew the averages.  The fact is that without buying companies like Google in the 90's, apple in the 80's and a few obscure biotech companies, the smaller caps have pretty much done as well as their larger cap counterparts. 

A little less than half of the returns that stocks provide investors are in the form of dividends again proving that you do not necessarily have to take on more risk to get good returns.