Imagine the potential for added growth if you contribute and reinvest every year. Average costs over time If your IRA is invested in stocks, you may be concerned about identifying the right time during the year to make your contribution. But instead of trying to time your investment, tap into the power of dollar cost averaging. Dollar cost averaging means investing a set amount each month. In this way, you buy more shares when prices are low and fewer shares when they're high.
Many investment firms offer dollar cost averaging into stocks and other investments.
This strategy can't guarantee a profit or prevent a loss, but it does ensure you won't invest all your money at the market high, and it lowers your average cost over time. IRAs are a powerful savings tool, and these time-tested strategies can give your IRA an extra power surge. Talk to your financial professional to learn how you can take advantage of dividend reinvestment and dollar cost averaging. Guy Steele is a financial planner and head of the Pali Palms office of Edward Jones.