First of all, this is a long-term investing style, if you are not that kind of person then it’s not for you.
Let’s say you can spare $500 a month. By allowing dollar cost averaging into just 3 index funds, $300 into one that holds total US stock market, $100 into once that hold foreign stock market and $100 into one that hold US bonds – you can say you hold almost every investment in the world that’s worth owning.
Every month you buy more
If market has dropped your present investment now have more value, so now you buy more shares than before
If market goes up your money buys you fewer shares
By making this strictly disciplined investment at start of every month, you prevent your emotions from putting more money in market when market is very high ( and it’s very overvalued) and refusing to buy more after market has crashed and now ( things are cheap but for speculators now it’s risky)
According to Ibbotson Associates, the leading finical research firm, if you invested $12,000 in s&p 500 stock index at beginning of SEP 1929, 10 years later you would have only $7224 left but if you started investing $100 every month then buy August 1939 you would have made $15,571. THAT’S THE POWER OF DISCiPLINE BUYING AND EVEN IN FACE OF GREAT DEPRESSION AND WORST BEAR MARKETS (2007). YOU CAN MAKE MONEY WHEN ALL OTHERS ARE LOSSING, PROVIDED THAT: 1. YOU INVEST IN INDEX FUNDS ( FOR DIVERSIFICATION) NEVER INVEST IN A SINGLE STOCK 2. YOU DO INVEST NO MATTER WHAT AT START OF EVERY MONTH 3. HAVE ATTITUDE TOWARDS MARKETS OF “I DON’T KNOW WHERE IT’S GOING AND I DON’T CARE”