You Should Be Dollar-Cost Averaging Your Gold Purchases
“I’d like to buy gold” says one reader, “and my crony told me to ‘dollar-cost average.’ What does that mean?”
Here’s a brief answer…
Dollar-cost averaging is a “set it and forget it strategy.” You’re simply committing to compensate a normal cost for bullion per unit over time. That way, we don’t need to worry about timing a market.
All we have to do is make gold purchases of a set dollar volume regularly, no matter a price.
You’ll be means to buy fewer ounces when a cost is high… though you’ll be means to buy some-more bullion when a cost is lower. This saves we from overthinking things… and from worrying about either you’re removing a good price.
Here’s a illusory instance to explain how it works (these bullion prices will seem silly):
Suppose you commit to buy $2,000 value of bullion each single month.
In a initial month, bullion sells for $1,000 so you’re means to buy 2 ounces.
In a second month, bullion trades for $500, so you’re means to buy 4 ounces.
In a third month, bullion sells for $800, so you’re means to buy usually 2½ ounces.
At a finish of 3 months, we possess 8½ ounces during an normal cost of $706 per ounce.
By dollar cost averaging, we didn’t have to theory that approach a cost of bullion was going or either you’re blank out on a improved opportunity.
The strategy smoothed out a cost we paid.
We wish this helps.
Courtesy: Peter Coyne Managing editor, The Daily Reckoning