|Oh my! I need to try this cost averaging...|
As a solution, Cost Averaging is the best strategy for everyone that will not require rocket science or fancy financial analysis. The concept is simple, you will invest a fixed amount at a regular interval (monthly, quarterly or annually)on a chosen financial instrument regardless of the price level. The said strategy can be used for stocks investing but this is best applied to Equity Mutual Funds and UITF since this two offers diversification at a lowest possible investment amount which is suited for everyone.
Since nobody can predict and time the market and historically stock market increases in the long term, the result of regular investing at an interval is that those shares bought at a higher price are compensated with the one bought at lower price during market dips. Also, since investing is done regardless of the market price level, the rigorous analysis, timing and stock picking is eliminated making it easy even for the dummies. For this strategy to be effective, investing should be in a long term.
For the case study of cost averaging method, read the post: Cost Averaging in First Metro Save and Learn Equity Fund.