Dollar-cost averaging can take the stress out of buying stocks

The Ticker

November 30, 2001|By JULIUS WESTHEIMER

ARE YOU nervous about buying stocks? Instead of investing your money all at once, consider dollar-cost averaging.

"Dollar-cost averaging, investing a fixed amount of money on a regular basis, is one of the best long-term strategies," says Kiplinger's Personal Finance, January.

"When stock prices fall, you end up acquiring more shares at lower prices. People who contribute monthly to a 401(k) plan are dollar-cost averaging.

"If you stick to the program, you'll be forced to keep buying as prices fall, something many people have trouble doing because their emotions play such an important role in investing."

GOOD NEWS: "December historically has been the year's best stock market month," says the 2001 Stock Trader's Almanac, "with the S&P 500-stock index rising an average of 1.9 percent over the last 51 years. There has been only one minus December in the last 13 years."

TIGHTEN BELT: "Cutting back on new clothes, restaurant meals and fancy vacations can easily save you as much as $1,000 a month. If you invest that $1,000 at 8 percent a year, you will have $185,000 at the end of a decade." (Ray Martin, president, City Street Advisors)

RISING INCOME: "Robust dividend growth is a sure sign of a strong company," says Personal Finance. "Steady dividend increases add up to powerful total returns." The newsletter gives these examples: J.P. Morgan Chase & Co., Arrow Financial Corp., BRE Properties Inc. and NiSource Inc.

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