UNCOMMON CENTS 38

K.I.S.S. IF ONLY IT WERE SO SIMPLE FOR YOUTH TO PAY THEMSELVES FIRST FROM THEIR PAYCHECKS, PAY CASH AND AVOID DEBT. AFTER ALL, A LITTLE MONEY IN YOUR POCKET IS BETTER THAN MUCH IN ANOTHER'S. IF A HYPOTHETICAL, SIMPLY FRUGAL YOUTH COULD BE FOUND, HE WOULD HAVE SAVED UP $3000 READY FOR AN INVESTMENT. THIS IS WHERE DOLLAR COST AVERAGING COMES INTO PLAY. REGULAR MONTHLY INVESTMENTS OF $100 AFTER THE INITIAL PURCHASE OF SAY $3000 OF A U.S. STOCK MUTUAL FUND, WILL GUARANTEE THE LOWEST COST PER SHARE. THE LOWEST COST PER SHARE, NOT THE LOWEST PRICE PER SHARE ALLOWS CONTINUOUS INVESTMENTS TO TAKE ADVANTAGE OF LOWER PRICES AS WELL AS HIGHER PRICES OVER TIME. HERE IS HOW DOLLAR COST AVERAGING (DCA) WORKS. EACH MONTH THE SAME AMOUNT, SAY $100, IS INVESTED IN A MUTUAL FUND WITHOUT PAYING ATTENTION TO THE PRICE PER SHARE THAT MONTH. THEREFORE, EACH MONTH $100 WILL BUY A DIFFERENT NUMBER OF SHARES BECAUSE OF PRICE FLUCTUATIONS. ONE MONTH $100 MIGHT BUY 5 SHARES AT $20, THE NEXT MONTH $100 MIGHT BUY 10 SHARES AT $10 AND ANOTHER MONTH $100 WOULD BUY 4 SHARES AT $25. TOTAL COST $300 AND TOTAL SHARES OWNED 19. THE AVERAGE COST OF THE SHARES WOULD BE $15.78. OVER THE LONG RUN YOUR $100 BUYS MORE WHEN PRICES ARE DOWN AND FEWER SHARES WHEN PRICES ARE UP AND YOU MAKE A BUNDLE IN THE END. THE MORE MONEY REGULARLY INVESTED DIVIDED BY THE PRICE PER SHARES OF THE FUND, PROVIDES PROFIT OVER TIME. AMAZING.

I KNEW A CONSERVATIVE WOMAN WHO CONSISTENTLY PLUNKED A FEW DOLLARS EACH MONTH INTO AN INVESTMENT FOR YEARS. LIVING CONSERVATIVELY HELPED PROVIDE THE FUNDS, BUT PERSONAL RESPONSIBILITY ALLOWED HER TO PASS ON TO HER CHILDREN A NEST EGG OF NEARLY A HALF MILLION DOLLARS. NOT BAD FOR A CHILD OF THE DEPRESSION WHEN THE MINIMUM WAGE WAS NOT A BONE OF PHONEY CONTENTION PICKED OVER BY POLITICIANS FOR PERSONAL ADVANCEMENT AT THE EXPENSE OF THE CONSUMER.