We have a question, he says, when dollar-cost averaging into the market, "Always be buying." How often should you do it? Once a year, once a quarter, once a month, once a week, every day? What do you think? Jason knows what I'm going to say because I'm a bit obsessed with this. Let me break it down for you. Dollar-cost averaging can be done in two ways. First, there's lump sum, where you invest a big chunk of money all at once.
Second, there's dollar-cost averaging through regular monthly contributions from your cash flow. Lump sum investing works out well if the amount is small and doesn't significantly impact your life. Around 80% of the time, investing the entire sum at once is favorable. However, if it's a substantial amount like proceeds from selling land or a business, it's better to spread it out over 10 to 12 months. Now, regarding consistency, even if you receive an annual bonus, you can allocate a portion to long-term investing and put it in once a year. That's still dollar-cost averaging. For those incorporating it into their monthly cash flow, such as contributing to their employer plan or Roth IRAs, the frequency is typically once a month.
As you progress to step seven of the
Financial Order of Operations and reach hyper-accumulation, you can also start loading up your after-tax accounts. Here's where it gets interesting. I started off investing once a month, but then I realized I always ended up buying on the 15th or 30th of the month, which was quite satisfying during market downturns. So, I decided to make it even more fun and started buying every Friday. It's become a bit of a obsession now, but I don't think I'll go beyond once a week. I haven't felt the need to dollar-cost average every day. It's more of a mental exercise and a way to maximize every dollar. While it may seem irrational, it's a mindset that excites us as financial mutants. Taking advantage of market dips and turning negatives into positives. The majority of our assets are fully invested, but it's a little trick that adds some fun to being a financial mutant. Having a plan is crucial, and aligning it with your pay periods is a great place to start. Consistency and always be buying are key. I've noticed that by nudging and peer pressuring some of our clients to save an extra few hundred dollars a month, I've indirectly contributed to their wealth. It's incredible to see how those small savings accumulate over time. Set it and forget it, and watch your wealth grow. So get out there and make it happen.
Want to know what to do with your next dollar, you need this free download:
the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.