People take a variety of different approaches to investing for their retirement.

Some may invest in fits and starts. Whenever they “come into some extra money,” they invest some in something that seems good to them at the time. That’s a pretty random way of saving for retirement, and not really reliable.

Then there’s the common stereotype of a successful investor, which pictures an individual who somehow always knows when a stock is about to increase or decrease in value. They invest in that stock just before it grows significantly, and they sell that stock just before it drops in value. This is the epitome of the popular investing advice to “buy low, sell high.”^[1]

That approach is often referred to as “timing the market,” and succeeding by following it is largely a myth.^[2] Consider all the professional brokers and traders who devote their entire careers to buying and selling investments. They’re educated and experienced in their field and can likely identify trends in the markets in a general sense. But they don’t always get the timing right for a specific stock, and, if they do, it might be from insider trading^[3] (illegal stock tips) – not a good idea.

If you try to buy stocks when you think they’re about to rise in value because of something you read in the news – remember that other people read the news, too. Odds are high there will be a bunch of other folks reacting to the same news in the same way you do – and when you’re all buying, the stock value will quickly rise artificially high and many will end up paying too much for the stock. What happens when you’re all trying to sell at the same time? The value rapidly drops artificially low and many end up losing money through the sale. You end up chasing the stocks up and down and are still likely not to beat the overall market despite all your efforts.

Sadly, the financial life of someone attempting to time the markets is often “a tale told by an idiot, full of sound and fury, signifying nothing.”^[4]

Another approach to investing is more boring, but more steady. It’s called Dollar Cost Averaging and it works well for many younger investors. It’s probably the most common investing method today, because so many people invest in a 401(k) or 403(b) using a regular recurring paycheck deduction through their employer.

With Dollar Cost Averaging, you invest a steady predetermined amount on a regular basis regardless of whether the market is up or down.^[5] That means you’re paying a higher price per share when the value is up, but also means you’re paying a lower price per share when the value is down. And that results in more shares purchased when the price is low.

Because the stock markets generally rise in value over the decades, this method typically provides for consistent growth of your investments over time. And it doesn’t require any magical (or illegal) special knowledge about the stocks. It just works, fairly regularly, for just about anyone with time to wait for their investments to grow. It’s not guaranteed, but it should probably be considered for at least some portion of your retirement wealth-building strategy.

James Holloway, Sr. and the rest of the team at Texas Financial and Retirement work with a wide variety of clients. Some are more risk averse and prefer safer investments and strategies, while others are more risk tolerant and are willing to take higher risks. Contact bestclients@texasfinancialandretirement.com or 903-534-5477 today to ask about a free initial consultation. If it seems like we’re a good fit, we’ll discuss your retirement dreams and goals, learn what you’ve accumulated toward your retirement so far, then assist you in developing a plan to help you maximize your retirement income and minimize any tax burden on your heirs.

We’d like to help you get retirement right, your way, whether that means Dollar Cost Averaging or another investing approach.