A Penny Saved

The Dow closed at a new high(or at least close) yesterday.  Of course this brings out the buzzards with their ever familiar cat calls.  “Bubble,  Buuuuubbbbllleeee,” They say.  If they are traders, they’re selling and maybe even selling short.  And there is a slight chance that they are right.

You see, the Dow, just like anything else has cycles.  Three years ago, the Dow had sunk pretty far from it’s all-time high.  That all time high was reached three years before the bottom was reached.  Are you seeing the pattern?  Three years.  If it follows the pattern, we should see it hit begin to decline and then hit bottom in 2009.

Does that mean sell off all of your stock and hold it in a high interest savings account?  Not if you’re a long term investor.

This is where dollar-cost averaging comes into play.  As prices decline, you buy more stock.  Each time you buy more stock at a price lower than before, your average cost of purchase goes down.  In the long run, when the market comes back up, your profit margin on any potential sales goes up with it because of the lower stock purchase price.

So, don’t run from a declining market. Run towards it and begin buying.

I feel that I should mention that I’m not a trained finance professional and that any advice found here should be double checked with a financial professional before you do anything.

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