Dollar cost average is a technique to buy an investment product with a fixed dollar amount at a regular bases for a given period of time. Some of us contribute regularly to our 401(k) retirement accounts with a fixed amount of money, that is a long-term dollar cost average to put money into stock or bond markets.
What we are talking about is how to buy into the market within a period of time. When the market is during a recession or in a correction, that presents a buying opportunity to put non-401(k) money into the market. A lot of us have trouble to put 100% cash into the market at once for various reasons. That is why we will use the dollar cost average technique to buy into the market. To do that, we need to determine a schedule. What is the total amount of money to put in? How long will the whole period be? What is the frequency to put the money in? and How much money to put in at each time?
Example:
Total amount: $60,000
How long: 3 months
How often: every 15 days
How much each time: 60,000/6=$10,000
The above is just an example and all the numbers can be adjusted to your own comfort. Good luck.
