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Investment Strategies for Today’s Market Environment
Author: Joel Baretto, CFP®
April 15, 2025
Uncertainties in the market and economies in general has recently caused markets across the world to tumble. It is a good time to remember that investing in the stock market is a long-term play. Although some may see what is currently happening as a tragedy, others may find an opportunity to get into the markets while it’s down. If you are considering the latter, there are a couple of ways you can do it.
There are two basic methods for investing a huge chunk of money: dollar-cost averaging and lump sum investment. Both tactics have advantages and disadvantages. Which one fits you best? Before making a choice, it’s a good idea to speak with your financial planner; nonetheless, the following factors might serve as a starting point.
What is Dollar Cost Averaging?
Dollar cost averaging is the method of making regular, equal investments regardless of market volatility. Dollar cost averaging is frequently used by investors, for instance by setting up automatic contributions into an IRA or depositing a portion of each salary into a retirement plan like a 401(k).
In order to invest a windfall, such as a bonus at work, a tax return, or a bequest, an investor may also employ dollar cost averaging. Instead of investing the funds in a single sizable transaction, the investor might spread out their investments in equal quantities over a number of months.
What is Lump-Sum Investing?
Investing in lump sums involves generating a sizable quantity of money all at once as opposed to a series of smaller ones. Lump-sum investing, for instance, is the practice of purchasing a large number of stock shares all at once.
Lump-sum investment can be most profitable when combined with other wise financial decisions. For instance, rolling over your 401(k) plan to an IRA or buying shares in a diversified fund all at once are two strategies to invest a significant sum of money while lowering your risk exposure. However, keep in mind that investing involves risk, so you should anticipate your account’s value to fluctuate.
What are the Pros and Cons of each approach?
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In conclusion, investing in the stock market involves risk. If you are a risk taker and speculating for short term growth in the current market, perhaps a lump-sum strategy will suit you, as long as you know what you’re doing. Otherwise, consider a dollar-cost-averaging strategy and don’t forget to diversify. If you are unsure of what you are doing, seek professional guidance from a seasoned wealth manager.
Disclaimer:
- The information provided is for educational purposes only and does not constitute personal financial, tax or investment advice and should not be relied on as such. It does not take into consideration any investor’s particular investment objectives, strategies, time horizon, and tax or legal status. Abacus Wealth International (AWI) does not provide tax or legal advice. Please consult a tax or legal professional for corresponding tax and legal advice.
- All material and content have been obtained from sources believed to be reliable. AWI does not guarantee the accuracy of the information provided and shall not be held liable for decisions based on the foregoing information.
- All examples of graphs, financial products and historical returns contained in the foregoing material are for illustration and educational purposes only and shall not be deemed as financial advice or recommendation. Past performance is not indicative of any future investment returns.