How dollar-cost averaging can make you a millionaire


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Have you ever wanted to invest in the stock market using a hands-off and automatic approach?


With the dollar cost averaging strategy, you can.


If you’re ready to learn about one of the easiest and most passive investing strategies, then keep reading.


(Bonus: In this article, I’ll show you how you could become a millionaire by 49 if you apply the dollar cost averaging strategy).


Investing money might help you grow your wealth, but it can be a scary concept for some. According to a recent FinanceBuzz survey on investing habits, nearly three in 10 Americans haven’t started investing yet.

There are many reasons that stop us from investing. Unfortunately, some of these reasons are actually old investing myths. But putting off investing may be one of the most significant money mistakes you can make.

To help more people start investing and making smart money moves, we’re going to present 15 investing myths, explain why they’re outdated and how they could be costing you money.


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FianceBuzz’s survey found 62% of people believe you should have $1,000 or more to open an investment account. A couple of decades ago, some mutual funds required a minimum initial investment of thousands of dollars.

But this widely believed myth that you need lots of money to start investing simply isn’t true. Today, investing apps have changed how we invest, and many traditional brokerage firms allow you to begin investing with very little money. You can even get started in investing with as little as $1 if you buy fractional shares.


It’s a common belief that a bank account is the best place for your short-term investments. The money is usually insured up to at least $250,000 thanks to Federal Deposit Insurance Corp. insurance and at least won’t decrease in value.

Unfortunately, bank accounts typically have awful interest rates. If you want to get decent earnings on your money, other options exist. For instance, certificates of deposit and money market deposit accounts are also normally FDIC insured and may offer higher interest rates.


If you’ve ever tried to watch an investing show on TV, you’ll know that these strategists often talk about very detailed concepts and strategies in an attempt to eke out higher returns. Thankfully, everyday investors don’t need that level of complication in their investing lives.

Some of the best investing apps just have you fill out a questionnaire about your goals, risk tolerance, and other relevant financial information. Based on this, they suggest a portfolio of investments that fits your needs. They can even automate your investing in that portfolio so you can regularly and easily add more money.

Although you don’t want to blindly follow the advice of an investing app (or a human, for that matter), these services can take care of some of the more complicated work for you.


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It’s easy to think stocks are the only option to invest in. You constantly hear about the stock market reaching new all-time highs or dropping by a few percent in the media. The press doesn’t tend to cover other investments as much.

But stocks are only a tiny part of investing. You can invest in many other types of assets, including real estate, cryptocurrency, collectibles, artwork, precious metals, and more. For example, Masterworks helps you invest in fine artwork that you likely couldn’t otherwise afford to own.


The traditional idea of investing makes it sound like it would take up a lot of your time. You have to research investments, read a company’s public financial reports, and keep track of the news that could impact stock prices. And you have to do that for everything you invest in, right?

Thankfully, the answer is no. You can earn decent returns throughout long periods in other ways. For example, you could easily diversify your assets just by investing in index funds.

Index funds often have diverse holdings, which means they spread out the risk over multiple companies rather than concentrating your risk in one or two. You won’t typically see as high a return as you might with an individual stock, but you also won’t have to spend as much time managing the investments and expose yourself to less risk of losing money too.


Investing used to be expensive. You had to pay brokers to make stock trades for you and there were a lot of other potential fees as well. But things have changed over the past couple decades.

Now, there are investing apps that offer fee-free trades. And even some of the major investing powerhouses that have been around for decades have started offering commission-free trades.

If you want to invest in a more diversified investment, such as a mutual fund, some companies even offer no-fee investments. In particular, Fidelity offers four mutual funds that have 0% expense ratios and no minimum initial investment.


If you work at a company that offers a 401(k) plan, it’s easy to think a 401(k) is the only account you’ll need for retirement. Although that may work out in some cases, you may be better off having more than just a 401(k).

You might also consider opening an individual retirement account (IRA). You could also open a taxable investment account. These accounts may work better for you than a 401(k) because you choose where you open them. That means you get to pick where and what you invest in rather than having a 401(k) plan force you into a limited set of options that may come with high expenses.


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When you research investments, you’ll likely see a section detailing the investment’s past performance. And although that may sound good, the truth is it isn’t an indicator of the investment’s future performance.

No one has a crystal ball. What happened yesterday may have nothing to do with what happens tomorrow. For instance, a company with a stellar performance record before a recession may go bankrupt when a recession hits.

Past performance is something you should consider, but know that it doesn’t promise any given returns in the future. Instead, focus on the fundamentals of a company or investment.


When you see your investments taking wild swings from day to day, it’s easy to get worried. You may think that selling your assets today and waiting until the market calms down will protect you from the storm. Unfortunately, that may not work out.

Volatile markets can have wild swings both up and down. If you sell once investments have started to dip, you could miss out when markets begin their recovery. The best days in the market often come after the worst days. If you don’t reinvest at the perfect time, you may miss out on these fantastic opportunities. This could dramatically reduce your investing returns.

smart money move to make in a volatile market could be holding a diversified portfolio for the long term so the wild swings even out over time.


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Gold is an investment that many people have misconceptions about, including the idea that it’s the best investment. Historically, gold may have a good track record. But what happens if a gold mining company finds a massive supply of new gold? If the supply exceeds the demand, gold prices could plummet.

When you invest in only one thing, such as gold, you open yourself to huge risks. Other assets may outperform gold and provide better overall returns if gold performs poorly for an extended period. It’s generally smart to invest in a diversified manner rather than putting all your money into one investment.


Bonds, which is a fancy name for debt, are normally viewed as a stable source of investment returns and retirement income. Many investment experts recommend slowly switching from stocks to bonds as you get older.

Unfortunately, the broader economic picture has made this strategy less certain. The price of bonds increases when interest rates drop. Interest rates have been falling for decades but may start rising in the future. When this happens, the price of bonds may decrease.

Instead of blindly following a rule of thumb, consider why you want to own bonds. If your reasoning aligns with the investment and its risks in the current environment, consider adding bonds to your portfolio.


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Buying shares of big-name companies — such as Google, AmazonApple, and Facebook — can be viewed as some of the best ways to invest by new investors. These stocks have all had meteoric rises in their prices from when they first debuted on the market.

But big companies aren’t always a good investment. Although they may have had reliable performances in the past, their futures may hold risks that result in lower returns. Some behemoth companies even end up going out of business, such as Toys R Us and Circuit City.

Large companies aren’t always able to adapt to changing times. If they can’t, your investment in them may lose value. Instead, it may be wiser to invest in a diversified portfolio of companies of different sizes.




When you look at the long-term historical returns of the stock market as a whole, the market appears to provide reasonable returns. If you only look at this long-term trend, it’s easy to think you face no risk when investing. That isn’t the case.

You always face risks when you invest, even when you invest in the most simple and boring investments. If you suddenly need your money, you may have to sell when an investment’s price has decreased. This means you don’t get the advantage of the long-term historical returns because you had to take the money out of the market early.

If you’re nervous about the risk of investing, that’s a good thing. It forces you to educate yourself and find ways to decrease your risks while still meeting your financial goals. If you’re still too nervous about investing, talking to a fee-only fiduciary financial advisor may help.


According to FinanceBuzz’s survey, one of the top-cited reasons Americans aren’t investing is that they’re afraid of losing money. Investing is risky, as we just discussed, but the degree of risk depends on what you invest in and how long you plan to stay invested.

Some investments are incredibly safe, such as certificates of deposit, money market accounts, and U.S. Treasurys. And even some riskier investments have historically provided positive long-term returns as long as you stay invested and invest in a diversified manner.

Taking a risk tolerance assessment may help you decide on the best path for you. Based on the evaluation results, you’ll be able to craft an investment plan that allows you to take the risks that fall within your comfort level. These sorts of assessments are often part of signing up for an investing app or opening a brokerage account.

The bottom line is that If you don’t take any chances, you reduce your potential returns. This may be disastrous, especially if the cost of living increases over time and the money that’s just sitting in your savings account can’t keep up with those costs.


You’ve probably heard the saying “The best time to plant a tree was 50 years ago. The next best time to plant a tree is today.” Investing works the same way.

In an ideal world, people would start investing early in life to take advantage of compounding returns. But even if you didn’t start early, the next best time to start investing is today. If you start investing now, you’ll have more time to watch your investments grow than if you start next year.

Consider using an investing app to simplify the process of starting to invest while still meeting your goals and current financial situation. Once you’re more comfortable, you can research more investment providers in detail and move your money at that time if that feels like a good fit.


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Investing myths are commonplace in our society because people haven’t taken the time to research the facts. And, quite frankly, investing can be an overwhelming topic to research on your own. But now that you’re aware of why these investing myths aren’t a reality, you can share this knowledge with your friends and family.

More importantly, you can quit using these myths as a reason to put off investing. It’s easier than ever to start because now you know that you can start investing with just the change you have in your pocket.


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This article originally appeared on and was syndicated by




What is Dollar Cost Averaging?

If you’ve asked yourself, “can investing make you rich,” then the answer is yes – depending on the investing strategy you implement.

One of the best investing strategies to build long-term wealth is the DCA dollar cost average strategy.


Dollar-cost averaging is a simplified and automatic investing strategy where you (the investor) can systematically take advantage of market ups and downs.


Dollar Cost Averaging Definition: Dollar cost averaging (aka DCA) is a recurring and automatic investment strategy where the investor selects the amount of money to be invested, the interval in which it should be invested, and the type of investment.

The keywords in this definition are:

  • Automatic
  • Recurring

You could do monthly or even daily dollar cost averaging – it just depends on your comfort level and the amount of money you can invest.


Pro Tip: Dollar-cost averaging is out-of-sight and out-of-mind, and you don’t have to monitor the markets every minute.

Instead, you can do the things you have to do, like focus on your family and your job.


Some examples of investment applications that can help you with your dollar cost-averaging strategy include:

  • Acorns (for investors who are just starting out)
  • M1 Finance (for those investors who are focused on the long-term)
  • Gemini(for investors who want to invest securely in cryptocurrency)

Pro Tip: Think of dollar averaging just like your 401k or 403b plan: With every paycheck, you typically contribute a set amount of money to a pre-selected investment.

Investing in your workplace retirement plan is completely automatic and you typically don’t have to think twice about your dollar cost averaging frequency or investments.


Dollar cost averaging

How Does Dollar Cost Averaging Work?

Especially when it comes to investing in the stock market, people are naturally driven by emotion – which is not always a good thing.

In fact, most people buy at the wrong time (when stock market prices are at all-time highs) and most people sell at the wrong time (when stock market prices are at all-time lows).


So, why is dollar-cost averaging a good idea?


The DCA strategy takes out the human emotion by investing your money automatically in a pre-determined stock (or bond).


Pro Tip: Dollar cost averaging helps an investor spread their risk of investing in a volatile market by investing over a period of time.

Here’s an example of how to calculate the dollar cost average strategy:


Dollar Cost Averaging Formula: Cost per share = Total Amount Invested / Number of Shares Purchased

Let’s take Amazon’s stock to calculate a dollar cost averaging example.

Amazon stock price

Let’s say that you decide to invest $100 into the Amazon stock for 5 days straight, the second the market opens (which is 9:30 am EST).

Here’s how the numbers would look:

Amazon investing table

While $100 won’t buy you a lot of Amazon shares ($100 / share price), you can see how dollar cost averaging takes advantage of daily price fluctuations, which can help you buy more – and sometimes less – of the Amazon shares.

Here’s a quick overview:

  • Investment strategy: DCA
  • Total amount invested: $500
  • Total number of shares purchased: 0.1439
  • Average cost per share = $3,474.64

The average cost per share (total invested / total number of shares owned) is $3,474.64.


Dollar cost averaging stocks can help you get a bigger bang for your buck because you lower the cost of a share by investing over a period of time rather than investing in 1 lump sum at a given period of time.



Here’s what would have happened if you decided to invest your $500 as a lump sum on the first day of our trial:



Below is a breakdown:

  • Investment Strategy: Lump Sum
  • Amount Invested: $500
  • Shares Purchased: 0.1434

However, if you had invested using the dollar cost averaging strategy, the breakdown would read:

  • Investment Strategy: DCA
  • Amount Invested: $500
  • Shares Purchased: 0.1439

In this dollar cost averaging vs. lump sum investment scenario, it makes more sense to invest over a period of time – because you save money and you get more shares.


Pro Tip:While a difference of 0.0005 shares doesn’t seem like a lot right now, it could make a significant impact on your wallet in the next few decades.

This is where I like to multiply differences using a bigger scale.


If you multiplied the shares purchased by a factor of 1,000, you would immediately notice a difference: 1,434 shares purchased versus 1,439 purchased (which is a difference of several thousand dollars).


Stocks aren’t the only example that work with dollar cost averaging.

In fact, you could practice dollar cost averaging S&P 500 index funds or you could even start dollar cost averaging crypto!

Dollar cost averaging strategy

How to Start Dollar Cost Averaging

Below are several steps you can take today to develop your dollar cost averaging strategy and build long-term wealth.

Step 1: Open an Investment Account

First things first, to start dollar cost averaging, you’ll have to open an investment account. If you don’t want to invest $100’s or $1,000’s – yet – into an investment account, check out Acorns


With Acorns, you can start investing with as little as $5.


If you want to invest $100’s or $1,000’s, then check out M1 Finance



M1 is the future of finance in a sleek, modern app.


With M1 you can enjoy :

  • Automation
  • Free investing
  • High yield checking
  • Low rate borrowing
  • Investment optimization

M1 Finance certainly is an app that steps up your investment game if you’re ready to accomplish millionaire status.

Step 2: Select Your Investment Frequency

Select the frequency you want your money to be pulled from your checking account into your investment account.

This could be:

  • Daily
  • Weekly
  • Monthly

Step 3: Determine Your Investment Amount

The next part is figuring out how much money should be pulled from your bank account and into your investment account.

If you signed up with Acorns, you can invest with as little as $5 – and you can invest in 5 basic portfolios:



Typically speaking, if you select the most aggressive portfolio, you are taking on more risk (for a potentially greater return).


The younger you are (and the more years you have in the stock market before you start withdrawing money for retirement), the better it is to consider investing in an aggressive or moderately aggressive portfolio.


However, if you signed up to M1 Finance, then you can customize your portfolio – or choose from 80+ pre-designed portfolios.

Finance pie

Because M1 Finance offers more selection, this app could be a better fit for more experienced investors.

Step 4: Select Your Investment Types

Now it’s time to select which investment(s) you would like to purchase with your dollar cost averaging strategy.

If you want a financial expert’s opinion to determine which investments would best suit you, take a peek at the Seeking Alpha investment platform


You could invest in several different selections, such as:

  • ETFs
  • Bonds
  • Stocks
  • Index funds
  • Mutual funds

If you selected only 1 investment (like the S&P 500 index fund), then you would naturally mark that 100% of your dollar cost averaging to go to that particular fund.

What if you have selected multiple stocks you want to invest in?

For example, let’s say you want to invest in:

  • VOO – Vanguard S&P 500 ETF
  • VTI – Vanguard Total Stock Market ETF
  • VSMAX – Vanguard Small-Cap Index Fund

Let’s explore how you can dollar cost averaging into multiple investments with this hypothetical scenario.


DCA pie

If you invested $250 every 2 weeks:

  • 30% of the $250 bi-weekly investment plan would purchase the Vanguard Small-Cap Index Fund
  • 30% of the $250 bi-weekly investment plan would purchase the Vanguard S&P 500 ETF
  • 40% of the $250 bi-weekly investment plan would purchase the Vanguard Total Stock market ETF

Pro Tip: Use percentages to designate how much money you want to invest instead of hard dollar amounts because the value of a share will always fluctuate.

If you increase your contribution (let’s say you received a promotion at work and now instead of contributing $250 every 2 weeks, you can contribute $300 every 2 weeks), the percentages would automatically increase the dollar amounts to purchase your investment options.

That’s the beauty of dollar cost averaging: It’s hands-off and it’s automatic.

Market Timing vs. Dollar Cost Averaging

Perhaps you’re asking yourself, “is dollar cost averaging a good idea?”


While no one knows what the markets are capable of doing in the next day let alone the next 10 years, it could be fair to say that markets are likely going to be higher in the future than where they are today.



That’s why it’s important to understand the foundation of dollar cost averaging.

Look at this illustration of the stock market over the past several decades:

Sp 500 chart

As you can see, the stock market has seen up-swings and down-swings.


However, we don’t know when the absolute market bottom will be and when the market peak will be because we aren’t fortune tellers.

This is where the DCA strategy comes into play.


Pro Tip: Over time, stock market prices increase.

To ensure you get a piece of the pie, you can start dollar cost averaging investing into the stock market over very long periods of time (we’re talking 3 to 5 decades).


Do not try timing the market.


In a perfect world, you would know whether markets are sitting at all-time highs today and whether or not you should sell your investments.


But, we don’t live in a perfect world and we don’t know what markets will do tomorrow.


It’s not about timing the market, it’s about time in the market.


Typically speaking, the goal of market timing is to reduce losses by either pulling out of the markets completely at a market high (in anticipation of a market low) or by investing 100% in a market low (in anticipation of the stocks increasing).


Below is the statistical data that shows why this theory is inherently flawed.


The first chart below illustrates your expected annual return on a $10,000 investment in the S&P 500 if you invested for 20 years versus if you timed the market and avoided the trading days with the biggest losses.

Market timing

If you had missed the 40 worst days in the S&P 500, then you could have increased your overall investment returns by almost 118%.

However, most investors don’t perfectly time the market and miss days with the biggest gains, which causes their performance to turn negative, as illustrated below.

Market timing

In an ideal world, market timing could be the ultimate millionaire investing strategy, however, our crystal balls seem to be broken.

That’s why consistent and automatic investing with the dollar cost averaging formula is how you can ensure to take advantage of the positive annualized returns, regardless of missing the days with the worst losses.


The Bottom Line:

The key to making wins in the stock market with the dollar cost averaging strategy is staying invested for the long run – no matter if the market is experiencing ups or downs.

Dollar Cost Averaging & the Markets

Dollar-cost averaging is a powerful tool that you can implement as your investing strategy especially if you want to invest consistently over the long term and remove your emotion from investing in the stock market.


Pro Tip: While dollar cost averaging might not be the best investing strategy for every situation, it certainly creates solid results over the long term.

To gain a better idea of how dollar cost averaging works, it’s also important to take a look at other investing strategies for comparison purposes.

Lump Sum Investing

Lump sum investing is when you invest 1 amount of money (like $1,000) in the stock market at one point in time.

Let’s take the Tesla stock, for instance.

Tesla stock price

Let’s say that you decided to invest your $1,000 as a lump sum investment into Tesla on market open (which is 9:30 am EST) on Tuesday, September 21, 2021.


How many shares would you have purchased?


Here’s the calculation:

Lump sum investing

This is an example of a lump sum investment – you effectively dump your cash into the stock market at 1 point in time and you buy shares for 1 price.


Now, let’s take a look at dollar cost averaging in a declining market.

A Declining Market

Declining markets – like the one in March and April of 2020 or during the Great Recession of 2008 – can be scary, they can be painful, and they can cause people to sell at the worst time possible.


Pro Tip: If you want to build long-term wealth, investing in a declining market is a great opportunity.

Yes, stock prices are decreasing during a recession.


What I try to do is reframe my mindset from “everyone is losing money in the stock market,” to “all these stocks are on sale!”

Instead of buying an overvalued Tesla stock at $742.39 for example, a stock market recession could lower the Tesla stock prices to $109 – like during the March/April COVID recession.


Pro Tip: Dollar cost averaging works its magic if you invest in declining markets.

Imagine if you had started daily dollar cost averaging into Tesla during a declining market like in early 2020.

Tesla stock price march

Take a look at how many Tesla shares you could have bought if you were dollar cost averaging your $1,000 investment in a 5-day period (so investing $200 daily).

DCA examples

Here’s the break-down of each Tesla share cost per day, back in early 2020 as the COVID-19 pandemic rolled around:

Tesla historical data

Here’s how many shares you could have bought for $200 each day:

Cost of shares

In other words, if you had stuck to a dollar-cost averaging strategy in down markets, you could have bought around 10.36 shares of Tesla (which would be worth now $7,691.16) versus buying only 1.36 shares (worth $1,000) of Tesla stock in an upmarket.


Declining markets are scary, but if you stick to your dollar-cost-averaging strategy, you can make a lot of money in the long run.

A Level Market

A level market isn’t necessarily a bad type of market.


A level market is just a market when not much activity is happening – for better or for worse – so you probably won’t see too much investment growth.


Referring back to Tesla, the Tesla stock experienced a relatively flat market from 2010 to 2019.


Take a look at the image below:

Tesla stock price 2011 2021

If you had started dollar cost averaging your $1,000 over 10 years, you probably would not have seen much growth in your investments.

Pro Tip: Typically for flat markets, a lump sum investment would do the same trick versus the dollar cost averaging strategy.

There is only one caveat: Hindsight is 20/20.


No one knows whether today’s market will be a flat market for the next decade or whether today’s market will be the highest peak for the next 10 years.


Since we don’t know how the market will perform in the future, even for flat markets, if you want to eliminate investing risk, then it’s likely a good idea to continue with your dollar cost averaging strategy.

A Rising Market

A rising market is when the value of a stock continues to increase in value over a period of time with little to no downside.

Almost everyone wants a rising market because there is virtually no downside (for now).


Pro Tip: In the short term, dollar cost averaging might not be the best investing strategy for a rising market.

In fact, if you were to invest a lump sum of money in a rising market, you would probably have higher returns than if you were to dollar cost average a small amount of your money over a period of time.


Let’s take a look at the Tesla stock example, again.

Tesla stock

Let’s say you had invested your $1,000 as a lump sum on November 20, 2020 where it seemed like Tesla stock was on a rising trend.

Lump sum

Now, let’s take a look if you had considered a dollar cost averaging approach by investing your $1,000 over a 5-day period.

Tesla historical data

Here’s how many shares you could have bought for $200 each day:

Cost of shares

Are you noticing a trend?


Pro Tip: A dollar cost averaging strategy in a rising market means that you buy fewer shares for the same amount of money.

In other words, you’d get more bang for your buck if you had invested your $1,000 as a lump sum and not with the dollar cost averaging strategy.


Take a look at the number of shares you would have with dollar cost averaging vs. lump sum investing:

Shares of lump sum

While I might not be making a good case for dollar cost averaging with a rising market – I should note that no one knows if you are in a rising market.


Hindsight is 20/20.


Pro Tip:  Because timing the market is typically not recommended and no one knows what the market will do tomorrow, it’s probably still a good idea to continue dollar cost averaging.

Stick to your long-term plan, and you’ll see the results.

Value Averaging

Another investing strategy is known as value averaging.


Value Averaging Definition:Value averaging is when you adjust the amount of money you invest in a particular stock to reach a target growth number.

When the stock price falls, you invest more.


When the stock price increases, you invest less.


Dollar-cost averaging vs value averaging can both be beneficial investment strategies, it just depends on your investment personality and the amount of money you can invest in the stock market.


Below is a comparison between the two investing tactics:

DCA strategy

In the end, the difference between the two investing styles – dollar cost averaging vs value averaging – really comes down to your personality and your comfort level when it comes to investing.


Personally speaking, I prefer dollar cost averaging.


While I am comfortable with investing, I just find myself prioritizing other things (like my business) over checking the markets every day to consider when I should value average my investments.


I just don’t have the time – nor do I want to make the time.


That’s why I rely on my dollar cost averaging strategy to consistently and automatically invest my money in the stock market.

Reverse Dollar Cost Averaging

There are many stages of life – and there are also many stages in investing.

Take a look:

Reverse dollar cost averaging

I thought I might as well throw this strategy into the mix – except reverse dollar cost averaging is literally the opposite of dollar cost averaging.


Reverse dollar cost averaging occurs in the distribution phase of the finance circle.


Reverse Dollar Cost Averaging Definition:Reverse dollar cost averaging is a withdrawal strategy designed for retirees who are looking for a systematic way to take money from their investments at regular intervals.

Since retirees are no longer working, they’ll need to cover their basic living expenses by using the money they had initially invested in the stock market.


One systematic way of doing so is by withdrawing $1,000 every month (for example) from a particular investment.


I thought it would be a good idea to share this financial strategy with you – but I don’t think this is something to worry about for now, since you’re probably still in the accumulation stage of life.

Does Dollar Cost Averaging Really Work?

Yes, it really does. Dollar-cost averaging is a great investment strategy producing solid returns – as long as you are consistent and focused on long-term progress.

Dollar cost averaging offers 5 key benefits:

  • Great long-term strategy
  • Reduces stress when investing
  • Excellent for beginner investors
  • Takes the emotion out of investing
  • Helps avoid market timing mistakes

Dollar cost averaging might not be the best overall strategy, but if investing is stressful for you and if you don’t want to monitor the stock market daily, then the DCA strategy is your friend.


Pro Tip: Studies have indicated that over very long periods of time, lump sum investing actually outperforms dollar cost averaging.

This is because historically speaking, markets have always increased in value – as shown by the example below.

Let’s take a look at the example below, comparing dollar cost averaging vs lump sum investing:

  • You make a one-time, $10,000 lump sum investment at the beginning of each period listed below; versus
  • You dollar cost average $10,000 each month, per time period referenced below


Lump sum

The lump sum investing strategy, in orange, is the clear winner.


Caution: Lump sum investing typically works best if you have a large amount of money (like from an inheritance or a recent business or home sale) that you are able and willing to invest.

Do you have a large amount of money to invest?


If the answer is no, then consider dollar cost averaging – even if it’s just with $5 – there are investment apps like Acorns that can get the job done for you.


Pro Tip:Even if you have a large amount of money to invest, it might be psychologically easier to invest smaller portions over longer periods of time by using the dollar cost averaging strategy.

I should also note that while lump sum investing does outperform dollar cost averaging most of the time – it doesn’t win all of the time.

In fact, dollar cost averaging beats lump sum investing 33% of the time.

Dollar cost averaging

So, does dollar cost averaging really work?



Drawbacks of Dollar Cost Averaging

While dollar cost averaging is a great investing strategy – especially for beginner and passive investors – there are some drawbacks.


Let’s take a look at some of the drawbacks of dollar cost averaging:


Trading fees are certainly a concern, especially if you decide to apply the dollar cost averaging strategy.


One investing app that has no trading fees is M1 Finance.


M1 Finance offers a very wide range of investment options – and it’s a great investment app for those who have some experience investing and feel comfortable selecting their own portfolio.


Then again, no single investing strategy is the “perfect strategy” for any one person.

Everyone is unique – there are different:

  • Personalities
  • Risk comfort levels
  • Investing backgrounds

For some people, the DCA strategy is the best, while for those who prefer to take a more active role in the markets, value averaging might be a better option.


Pro Tip: To succeed with most investing strategies, it’s a good idea to avoid making any withdrawals.

Withdrawals counteract the goal of building wealth and investing for the long term.


That’s why I always emphasize that your DCA investments are not your emergency savings fund account and should not be withdrawn.

Who Should Use Dollar Cost Averaging?

You should consider implementing the dollar cost averaging strategy if you can relate to the bullet points below:


Oftentimes, unless you’re 100% dedicated to your investment accounts, then dollar cost averaging might be the best investing strategy for you.


Even I, who is someone with plenty of investing experience, prefer to implement the DCA strategy because I honestly don’t want to be spending all of my time researching potential investment opportunities.


I prefer the automatic nature of the DCA strategy.

How to be a Millionaire with the DCA Strategy

When I say “anyone can become a Millionaire” I truly mean that anyone can become a millionaire.


Pro Tip: The first step to achieving millionaire status is breaking down the large “I want to become a millionaire” goal into smaller, actionable steps.

You tell me what’s easier to digest:

  • Saving $152,820 over 45 years to become a Millionaire by 65; or
  • Saving $9.43 per day to become a Millionaire by 65

I don’t know about you, but for me, the second choice seems so much more realistic – and less stressful!


By understanding how much you have to save daily as opposed to annually or monthly, attaining your goal becomes so much easier.

Let’s take a peek at how dollar cost averaging could help you become a millionaire over time:

Input Output

While you won’t join the two-comma club right away, you will start seeing progress over time.


How to be a Millionaire by 49

Let’s say you are 20 years old and want to become a millionaire before age 50.


It’s still possible.


You’ll have to save about $30.83 per day assuming a 7% return on investment.


Check out the math below:

Compound example

Even though I would love to see every young 20-year-old aiming to save $462.50 every 2 weeks, this goal might not be realistic for everyone.


That’s because so many 20-year-olds find themselves stuck in debt and often in low-paying jobs (that’s where finding a side hustle can often help!!).


What if you can afford to save at 25 versus age 20?


Check out how the dollar cost averaging strategy can still help you reach millionaire status if you start saving at age 25.

How to be a millionaire

How to be a Millionaire by 49 if You Start at 25

Below you’ll see how much you will have to invest on a bi-weekly basis if you start investing at age 25 and want to become a millionaire before age 50.

Millionaire by 49

Notice how you’ll be paying more than $6,000 per year to make up for 5 years of lost time (starting saving at 25 versus at age 20).


Pro Tip: By postponing your investment timeframe by only 5 years, you will have to increase your bi-weekly investment contributions by $232.

Even if you can invest $5 per day, then do it!


Pro Tip: As you earn more money, invest more money.

Don’t allow lifestyle creep to impact your dollar cost averaging goals.

Multi millionaire

How to be a Multi-Millionaire by 65

Do you enjoy going above and beyond?

Are you someone who doesn’t “just” want to be a millionaire, but a multi-millionaire?

If that sounds like you, then consider the following:

  • Increase your earnings
  • Decrease your spending

Below is a hypothetical example of how you can become a multi-millionaire by age 65, if you start investing at age 25 and earn a hypothetical 7% annual rate of return.


If you save and invest $40.46 per day for 40 years at a 7% return, you could be a multi-millionaire – and likely well into the $3-million-dollar number as well.


Pro Tip: Whether you want to become a millionaire or not – make sure you break down your goals into small baby steps.

Instead of saying “I want to have 3 million in the bank by age 65,” consider saying “I will save and invest $40.46 per day until I am age 65.”

The second statement is actionable, defined, and can help you make your goal a reality.

Dollar Cost Averaging Crypto

Are you a crypto enthusiast?


Believe it or not, you can implement the dollar cost averaging strategy for cryptocurrencies like Bitcoin and Ethereum as well.

Take a look at the latest run for Bitcoin:

Bitcoin price

As you can see, Bitcoin has seen some volatility over the past couple of years.


Pro Tip: It appears that it is very difficult to predict Bitcoin’s price movements.

It’s virtually impossible to predict where Bitcoin will be in the next year – let alone where it will be tomorrow.


However, if you’re looking to invest in Bitcoin for the long-term, and aren’t exactly sure how to start investing – then you should seriously consider applying the dollar cost averaging strategy!


Let’s say you have $1,000 that you want to invest in Bitcoin.


First – if you haven’t yet – consider opening up a Gemini account.After opening your crypto trading account, consider applying the dollar cost-averaging strategy for crypto.


Instead of investing a lump sum of $1,000 at a random point of time in the crypto markets, consider splitting up your $1,000 and invest that over time.

Bitcoin price

Here’s an up-close snapshot of the volatility in the Bitcoin markets.


If just looking at those ups and downs stresses you out, then dollar cost averaging could be your answer.


The DCA strategy systematically and automatically breaks up your big investment into many, smaller investments and buys your crypto over time.


Dollar cost averaging for crypto is also a good strategy to spread out your risk in these volatile crypto markets.

Dollar Cost Averaging Helps Those with Less to Invest

Dollar cost averaging might not be the best investment route for everyone, but the DCA strategy certainly is a great option for those who are not able to afford investing $100’s or $1,000’s of dollars in the stock market.


In fact, if you open an investment account with Acorns, you can start investing with as little as $5.


One of the reasons why dollar cost averaging works is because this automatic strategy continues to invest in the markets – especially when times are volatile or when markets are low.


Pro Tip: Typically, if you continue investing during the bear markets and recessions, you have a much greater opportunity for higher investment returns.

The DCA strategy invests for you, regardless of economic conditions.


While bear markets and recessions might spell danger, they should also spell opportunity.



In fact, if you invested $1,000 in the S&P 500 in 2008 (the Great Recession), left your money invested, and forgot about your account until 2020, you would have $4,158.00 in your account.


While the investment gains might not be linear in the short term, if you zoom out and look at the long-term, the stock market almost always increases in value.


Take a look at the fluctuations below:

Investing in bear market

It might be scary to invest when the market just keeps going down.


Here are some tricks that I employed while investing during a recession:

  • Follow your budget
  • Keep your expenses low
  • Remember to focus on the long term
  • Rely on your dollar cost averaging strategy

When you’re in the heat of the moment, it’s never easy to keep your emotions out of the game, but it’s necessary to win for the long term.


Does dollar cost averaging actually work?


While dollar cost averaging may not always be the best strategy, the DCA formula does remove emotion from investing in the stock market.It offers consistent returns and reduces your overall risk of investing in the stock market by spreading your investments over a period of time (typically decades).As long as you are consistent and investing for the long-term, chances are, the dollar cost averaging strategy will yield solid returns.


What is the best way to dollar cost average?

The dollar cost averaging formula focuses on simplicity, automation, and removing your emotion from investing in the stock market.


The DCA strategy is when you invest a set dollar amount into the same stock or index (like the S&P 500 index fund) at even intervals (e.g. weekly, monthly, etc.) over a period of time (typically several decades). Regardless of whether the markets are up or down, your dollar cost averaging strategy continues.


Is dollar-cost averaging the best strategy?

Dollar cost averaging is a good investment strategy for those who are looking to build wealth over the long term by investing small, consistent amounts of money.

However, there are other investing strategies that could also offer positive results such as reverse dollar cost averaging or considering dollar cost averaging vs value averaging, which sees the investor adjust their investment contributions to the portfolio in an effort to achieve a target growth rate.


Why is dollar cost averaging a bad idea?

An alternative to dollar cost averaging could be lump sum investing. When considering dollar cost averaging vs lump sum investing, one might argue that investing a lump sum today would likely improve your chances of making more money in the stock market versus investing small, consistent amounts of money over time. This is because historically speaking, markets have a tendency to increase in value.

Is dollar-cost averaging better than timing the market?

It’s not about timing the market – it’s about time in the market. That’s why dollar cost averaging typically is a better strategy than timing the market.


Start by investing small, consistent amounts over long periods of time. You could consider dollar cost averaging weekly vs monthly or even consider daily dollar cost averaging. Historically speaking, dollar cost averaging will earn you more than professional hedge fund managers who aim to time the market.

Closing Thoughts

Investing and building wealth is generally not a short-term game.


In fact, to become financially free and build passive income streams, you need to maintain a long-term mindset. This is where dollar cost averaging can help you stay in the long-term game.


Dollar-cost averaging is a benefit to building wealth because:

  • It invests your money automatically
  • It is a passive way to building wealth
  • It takes out your emotion from investing

While you might not see immediate results with dollar cost averaging, if you are consistently sticking with your game plan, chances are, you’ll see success in the decades to come.


In the end – you have the power to start your investment journey today.


It is 100% possible for anyone to become a millionaire – as long as you are consistent, maintain a long-term approach, and if you don’t withdraw any of your assets while dollar cost averaging.


If you’re ready to become a millionaire, it’s time to break down your goal into simple daily savings habits. Tweet


If that means you have to start saving and investing $9.43 per day to make your millionaire dream come true, then it’s time to figure out how you are going to accomplish that goal.


Maybe that means you don’t go to Starbucks. Maybe reaching your millionaire goal means you’ll need to get a roommate.


Sometimes managing your money is more of an art than a science. Tweet


Stick with your plan, and it will pay off in dividends (no pun intended).

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This article originally appeared on and was syndicated by

Investing myths you shouldn’t fall for


 Yet they persist, largely because too many people consider money a “taboo” subject and avoid talking about it. Many of us also never question these assumptions, so we don’t bother running a quick web search in the first place.

These persistent investing myths cost you money though, in a very real sense. Once you move past these myths, a wider world of investing opportunities open up for you.


istockphoto / yacobchuk


When it comes to new investors learning how to invest their money one of the biggest myths is that you can time the market and earn better returns.

To profitably time the market, you need to get it right twice. You need to buy at or near the bottom of the market, just as it turns upward. Then you need to sell at or near the top of the market, just as it prepares to plunge.

The most experienced, best-informed professionals can’t do this predictably. If they can’t do it, you certainly can’t.

Imagine you’re standing on the sidelines, telling yourself that you’ll invest “once the market drops.” But the market continues to rise for the next year or two before its next dip. When the dip does come, its low point might still cost more than today’s price. And that’s assuming you were able to buy at the low point, which you almost certainly won’t time properly.

In the meantime, you’ve missed out on years of passive income from dividends or rents, or interest.

Rather than trying to time the market, practice dollar-cost averaging. While it sounds complicated, it simply involves investing a set amount every month into the same diversified investments, based on what your budget allows for each month. You ignore timing and just mimic the broader upward trend, to earn better returns in the long run.


A common myth that many people assume is investing a little bit of money doesn’t make sense. They think that investing $5 a month is pointless so they never even bother to start.

That couldn’t be further from the truth. And it leads to wasted opportunities to save and invest over time. The truth is, investing a small amount of money can grow into large sums of money.

Jon Dulin, owner of MoneySmartGuides, offers this example: “Let’s say you are 25 years old and invest $20 a month for 25 years. During this time you earn an average 8% return — nothing spectacular, just average returns.

“At the end of 25 years, your $20 monthly investment has grown to nearly $19,000. If that doesn’t sound impressive, consider that your measly $20 each month could help your child or grandchild pay for college. Or it could pay for a family reunion vacation that you have on a tropical island.

“If you instead keep the money invested for another 25 years, when you reach age 75, you’ll have close to $149,000. This can cover several years’ worth of living expenses during retirement.”

Don’t make the mistake of assuming a small amount of money is a waste of time. Thanks to compounding, your money will grow into far larger sums over time.

Literally anyone can get started even with little capital. Take the first step now and start investing any excess money you have, regardless of the amount.




The sooner you start and the longer you keep the money invested, the more it will grow.

At an 8% return, you’d have to invest $5,467 each month to reach $1 million in 10 years. But it only takes $287 invested each month to reach $1 million in 40 years. That means that even people working for minimum wage can become millionaires if they invest consistently over time.

On the other end of the spectrum, some older adults look at those numbers and despair, wondering why they should bother investing at all. But that’s the price of delaying: you need to save and invest more each month to reach the same goal.

As the proverb goes, the best time to plant a tree was 20 years ago. The second best time is now. Start investing today with what you have, and let compounding work its magic for you.


In personal finance, the concept of “financial independence” means being able to cover your living expenses with passive income from investments. To make your day job optional, in other words, allowing you to retire if you like.

It takes hard work and an enormous savings rate, of course. If you plod along with a 10-15% savings rate, then yes, it will take you decades to save enough to retire.

My wife and I got serious about financial independence at 37, three years ago. We’re on track to reach financial independence within the next two or three years, in our early  40s.

How? With a savings rate of 60-65% of our annual income and aggressive investing. Neither of us earns a huge salary either, but we still enjoy a comfortable lifestyle with plenty of international travel. We can save so much of our income because we house hack for free housing, avoid owning a car by living in a walkable area, and get full health insurance through my wife’s job.

Nor are we alone. Read up on the FIRE movement (financial independence, retire early) to see how thousands of other people are achieving fast early retirement.


Rawpixel / istockphoto


The idea that popular companies make for good stocks sounds appealing on its surface. After all, if a company is popular, it’s probably growing its business.

But the popularity and even the quality of a business only tell half the story. The other side is the price you pay for it.

“Imagine someone approached you with two offers,” illustrates Ben Reynolds of Sure Dividend. “The first offer is to buy a $100 bill for $150. The second offer is to buy a $1 bill for $0.50. We all know the $100 bill is worth much more than the $1 bill… But any rational person would rather buy $1 for $0.50 than $100 for $150.” Two Warren Buffett quotes sum this up nicely:

“For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”

The reason it is difficult to do well investing in popular stocks is because they tend to be overvalued. Everyone already “knows” the business is going to be wildly successful, and that’s baked into the price. If there’s any hiccup in results, the price is likely to decline significantly.

Also, as evidenced by the GameStop fiasco, amateur traders can make a significant impact on popular investments. Just because something is popular doesn’t make it a good investment.


SlavkoSereda / istockphoto


Many people believe that it takes a lot of time to research stock and make frequent trades to make money, resulting in people leaving their investments with a professional or relying on expensive mutual funds.

But individual investors don’t need expensive investment advisors or managed mutual funds (more on them shortly). “For most retail investors, utilizing low-cost passive index ETFs is the easiest and cheapest approach,” explains Bob Lai of “These index ETFs track a special index, like the S&P 500 or the NASDAQ Composite Index. Because of index-tracking nature, you get to own all the stocks listed in that index.”

There’s no need to spend time determining the earning trend of companies like Apple, Facebook, Amazon, or Pfizer because you own them all. By owning all these stocks in the index ETFs, you are also not making frequent trades.

Counterintuitively, frequent trades generally lead to lower returns. Think of your investment portfolio like a bar of soap: the more you touch it, the smaller it gets.


Experienced, professional investors with the best data available to them still can’t pick stocks or time the market better than passive index funds.

Need proof? Over the last 15 years, nearly 90% of managed mutual funds underperformed compared to their respective benchmark index.

“The best investment strategy would be to invest in index funds of stocks or bonds that track an entire segment of the market — so you don’t have to worry about which specific security will give you the best return over short investing periods,” offers Kelan Kline, cofounder of The Savvy Couple. “My personal favorite low cost broad market index fund is Vanguard’s VTSAX.”


coffeekai / istockphoto


survey from JPMorgan Chase found that 42% of people who aren’t investing are staying out because they don’t think they have enough to invest.

On some level, this isn’t surprising. After all, historically people had to work with private wealth managers who require $100,000 or more. Even many popular index funds required a minimum of $10,000 to get started, just 20 years ago.

“That is changing with algorithm-driven investment tools such as robo-advisors,” says Jeremy Biberdorf of “In many cases, robo-advisors have no minimum investment and allow you to invest for a small fee. Even investing a small amount every year can make a big difference.”

Robo-advisors also won’t run off with your money or engage in insider trading. Many investors let their guard down and trust human investment advisors without doing any due diligence on them, especially when referred to them by friends of family members. “This makes investors vulnerable to conflicting advice in even the best-case scenarios. In the worst-case scenarios, they are easy prey for scammers. That’s why I call this blind faith in financial professionals the worst investment advice I hear everywhere,” explains Chris Mamula of Can I Retire Yet?.


Bonds offer one type of safety — but leave you exposed to other types of risk.

When an investor buys a bond from the US Government or most municipalities, there’s little risk of the borrower defaulting. So investors can sleep at night knowing that as long as they hold that bond, they’ll probably receive their modest interest payments.

But bond values gyrate on the secondary market just like stock prices. Investors who plan to sell their bonds rather than hold them can find themselves with paper that’s gone down in value, not up.

Which says nothing of the corroding effect of inflation on bond interest payments. When inflation runs at 3% in a year, a bond paying 3% interest-only generates a 0% real return.

That in turn means that bonds may not actually protect retirees against running out of money before they die. Sure, the stock market is volatile, but in the long term, it generates an average return of 10% per year. At a 4% withdrawal rate, investors will see their stock portfolio go up in value rather than down, in most years. Even conservative income stock investing, such as in dividend kings, can yield 3-4% in dividends alone, on top of share price growth. But bonds paying paltry 3-4% interest will cause a slow decay in your nest egg.

None of that means that you should never invest in bonds. But every investor should understand all the risks — not just the risk of default.


For many, selling options is a risky business.  And strategies such as Iron Condors add to the complexity.   “However, when managed correctly, options trading can be a handy addition to an overall portfolio”, explains Gavin McMaster of IQ Financial Services, LLC.

An iron condor is a delta-neutral option strategy that consists of both call options, and put options.  The strategy works if the underlying stock stays within a specific range during the course of the trade.

The key with iron condors is trading an appropriate position size (never risk your whole account on an iron condor) and knowing how to manage them.

Here are a few quick tips to reduce the risks with iron condors:

  1. Never risk more than 2-3% of your account size on any one trade
  2. Close the trade before the stock breaks through one of the short strikes
  3. Avoid earnings announcements
  4. Have one or two adjustment strategies ready in case the trade moves against you
  5. Focus on stocks and ETF’s with a high IV Rank

“While iron condors can be risky if you don’t know what you are doing, using appropriate position sizing and risk management rules can reduce the risks”, adds McMaster.  Generating income from iron condors can be a superb way to increase the returns on your portfolio


Paying off student loans before buying a home is a common misconception. While there is no “one size fits all approach,” many people believe their student loan debt will prohibit them from purchasing a home, however, this isn’t always the case.

“For example, doctors and dentists often carry large amounts of student debt, and typically have relatively high debt to income ratios. Therefore, exploring a Physician Mortgage, which allows individuals to carry more debt, may be a better fit than a traditional mortgage”, explains Kaitlin Walsh-Epstein with Laurel Road.

For nonhealthcare professionals looking to purchase a home while managing high outstanding student loan balances, refinancing their student loans can be a good option. By refinancing to a longer-term mortgage, the borrower may lower their monthly payments. However, this may also increase the total interest paid over the life of the loan. “Refinancing to a shorter-term mortgage may increase the borrower’s monthly payments, but may lower the total interest paid over the life of the loan.”, adds Walsh-Epstein.

Questions to consider:

  • What is your current student loan interest rate?  (Calculate the true cost over the life of your loan)
  • What are mortgage interest rates and are they projected to go up or down? (Currently mortgage rates are low)
  • Do you pay rent each month and if so, how will your rent payment compare to a mortgage payment? (As well as carrying costs of owning a home)
  • Is the home (or real estate) projected to appreciate in value?

The first step is to review and understand your credit score, student loan terms, and financial goals. Working towards making payments to lower your overall debt will help to raise your credit score, yet again increasing your chances of getting into your dream home faster!


In the 20th Century, investment advisors droned out the same advice to most clients: “Subtract your age from 100, and that’s the percent of your portfolio that should be invested in stocks.”

They pushed clients to move their money into bonds instead, as they grew older. A sound strategy — back when Treasury bonds paid 15% interest.

This century has seen perpetual low-interest rates, and bonds have offered poor returns compared to stocks. This says nothing of the fact that people are living and working longer, so they both have more risk tolerance and need their nest eggs to last longer.

Today, investment advisors tend to instead advise subtracting your age from 110 or 120 instead, if they bother issuing such generic advice at all. Everyone has their own unique risk tolerance and needs; as a real estate investor, I can earn safer, higher returns from real estate than bonds, so I avoid bonds altogether. A high earner nearing retirement might appreciate the tax benefits and security of municipal bonds and tailor their portfolio accordingly.

Be careful of anyone peddling such a broad rule of thumb as the “Rule of 100.”


There are plenty of great reasons to pay off consumer debt early. You earn an effective return equal to the interest rate, and it’s a guaranteed return on your money when you use it to pay off debt early. Mark Patrick of Financial Pilgrimage explains it like this: “Our family even went so far to pay down our mortgage debt despite record low-interest rates. With that said, throughout the entire process we invested in our retirement accounts, such as our 401(k) account. The benefits are just too good to pass up.

“The company that I work for provides a 401k match of up to 6% plus an additional 1% that every employee receives regardless. Therefore, if I contributed 6% of my salary to my 401(k) I would receive an additional 7% in contributions from my employer. I was more than doubling my money right away!

“If you decide to wait to pay down all of your consumer debt instead of starting to invest for your retirement you’ll miss out on years of compound interest. Compound interest is one of the most powerful forces in personal finance. The earlier you can get started, the better. For example, if someone invests $5,000 per year from age 25 to 35 and then never invests another dollar, they would likely have more money at age 65 than someone that invests the same amount every month from age 35 to 65.

“While I am a huge proponent of paying down debt, it shouldn’t come at the expense of forgoing investing. Especially when you want that money to grow until retirement. Try to find the balance between paying down debt and investing. We certainly could have paid down our debt faster if we decided not to invest throughout the process, but after 15 years in the workforce I’m sure glad we didn’t. Those dollars invested early on have compounded into much larger amounts over the years.


Despite having owned dozens of properties as a real estate investor, I live in a rental apartment.

In some markets, renting makes more sense than buying. Look no further than San Francisco, where the median home price is $1,504,311, but the median rent for a three-bedroom home is $4,567. After adding in property taxes and homeowners insurance, it would cost roughly double the monthly payment to buy a median home as rent, despite all the perennial complaints by San Francisco tenants.

And that says nothing of maintenance and repair costs, which average thousands of dollars each year for the typical homeowner. Renters don’t have to pay those costs or do that labor. They delegate them to the landlord.

Nor do renters need the fiscal discipline to budget money each month for those irregular, but inevitable expenses. Not everyone has that discipline, and they’re better off with the steady, predictable housing cost of monthly rent.

Finally, renting allows flexibility. Tenants can sign a month-to-month lease agreement and move out with a few weeks’ notice. Homeowners don’t have the flexibility; it takes months to sell a home, and typically tens of thousands in closing costs.


Buyers love to delude themselves that they’re buying an “investment” rather than spending money on shelter. It helps them justify overspending on the biggest, fanciest house they can possibly afford.

But make no mistake: housing falls under the “Expenses” category in your budget, not the “Investments” category. It costs you money every month, rather than generating it. House hacking marks a notable exception however, since your home helps you avoid a housing payment.

Sure, real estate often goes up in value. So do baseball cards, but that doesn’t justify hobbyists spending as much as they possibly can on them, while patting themselves on the back for their wise “investments.”

By all means, invest in real estate. But do it by buying true investment properties, or REITs, or real estate crowdfunding investments. The more you spend on housing, the less you can put toward true investments.




Making the bare minimum down payment often enables buyers to overspend on housing. They end up over-leveraging themselves, mortgaged to the hilt with an enormous monthly payment and little money left to actually furnish the place, or to enjoy any social life.

It also leaves homeowners vulnerable to becoming upside-down on their home, owing more than the home is worth. At that point, they become prisoners in their own homes, unable to sell without the lender’s permission. They end up stuck there until the housing market either improves or they pay their loan balance down enough to be able to afford seller closing costs without coming out of pocket.

While it sounds nice to put down next to nothing on a home, look at the bigger picture. If you spend far less on a home than you can afford, then a low down payment can serve you well. But if you’re straining against the limits of your budget, beware of putting every last penny into a tiny down payment with a huge monthly bill.

Considering waiting 3-6 months, and save some money. Or, selling assets like a structured settlement, or a car that you don’t use to generate the funds needed for a down payment.


The common wisdom was once to put down as much as possible when you buy a home, and 20% at the very least. However, this locks up a good portion of the money that could be growing at a faster rate with other investments.

“Putting down less than 20% does increase the monthly mortgage payment due to the higher interest rate and PMI (private mortgage insurance),” explains Andy Kolodgie of The House Guys. “However, you should compare your expected returns on that extra down payment if you were to invest it elsewhere, to the annual savings on your mortgage. For example, investing in stocks and bonds could allow you to earn more money while providing the added benefit of easy liquidity.

“A lesson learned from the 2008 mortgage crisis was you can’t eat equity in your home. During the recession, it was nearly impossible to refinance the equity out of any home, as home prices dropped below most people’s mortgage balance. Putting less than 20% down to stay more liquid and investing in alternative assets diversifies your portfolio, keeping buyers more risk-averse.”

Again, look holistically at your personal finances. As you near retirement, it makes more sense to play conservatively with a larger down payment to avoid PMI and reduce your monthly mortgage bill. For younger borrowers looking to buy a first home, it often makes more sense to put down 3-10%, and invest their other cash more aggressively in the stock market or other assets with high return potential.




To hear the pundits crying from their soapboxes, we all need at least a year’s worth of living expenses parked in a savings account in cash to protect us from a financial apocalypse.

And some people do. But not everyone.

Those with either irregular incomes, irregular expenses, or both do need a deep cash cushion. For example, as an entrepreneur, there have been months where I didn’t earn enough to take a personal distribution for myself from the company, so I earned $0 in personal income those months. Someone like me does need 6-12 months’ worth of living expenses saved in an emergency fund.

Salaried employees with safe jobs at stable employers don’t need as much cash in an emergency fund. That goes doubly if they live a predictable middle-class lifestyle with the same expenses month in and month out. They may only need 2-3 months’ expenses set aside in cash.

I go a step further with my emergency fund and think of it as tiered levels of defenses, like a medieval castle. The first level comprises cash savings — you can tap it if you need it. I also keep several unused credit cards with low-interest rates, that I can also draw on in a pinch. Then I keep several low-volatility, short-term investments that I can also turn to if needed.

All of which means I don’t actually need 6-12 months’ living expenses in cash after all.


designer491 / istockphoto


From a statistical standpoint, education level correlates strongly with income. People with college degrees earn more than those with high school diplomas on average, and those with advanced degrees earn a higher average income still.

On a personal level, it often doesn’t work out that way. I have plenty of friends and family members with advanced degrees, and most of them earn modest, middle-income salaries. Salaries with ceilings, and little room for advancement beyond their specialized niche. I can’t tell you how many teachers I know with several master’s degrees, who earn little or nothing more than their colleagues with bachelor’s degrees.

In fact, my friends and family with the highest incomes all stopped at bachelor’s degrees and while some got high-paying jobs, others went into business in some capacity.

This doesn’t mean you shouldn’t pursue an advanced degree if it’s required for your dream job. By all means, pursue your passion. But don’t assume that an advanced degree inherently means an advanced salary.


Many investors flock to gold when they fear inflation. But historically, gold often performs badly during times of high inflation.

From 1980-1984, for instance, gold lost around 10% in value, even as inflation raged at a 6.5% annual rate. Historically repeated itself in the late 1980s as well.

Gold actually works best as a hedge against a weakening currency — compared to other world currencies. When investors think the US dollar is about to crumble in value compared to the euro, pound, or yen, that marks a good moment to grab some gold.

But investors more generally worried about inflation should consider better hedges against it. Real estate offers an excellent hedge against inflation, for example. It has inherent value: people will pay the going rate, regardless of the value of the currency. The same goes for commodities like food staples; no one stops eating just because inflation surges.

Most professional investment advisors recommend holding no more than 5% of your portfolio in precious metals, if that. I personally own none, preferring to invest in stocks, real estate, and the occasional speculative gamble such as cryptocurrency.


This article originally appeared on The Financially Independent Millennial and was syndicated by





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