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1 big reason to invest in the stock market now

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This year has been tough for almost everyone, with rising inflation, crashing crypto market and falling stock market. At first glance, now may not seem like the best time to invest.

However, there’s one good reason to consider buying now, and it can save you a lot of money over time and increase your overall earnings: average cost in dollars.

What is the dollar cost average?

Dollar-cost averaging is a strategy in which a fixed amount is invested at regular intervals throughout the year. For example, instead of investing $5,000 once a year, you would invest $1,250 per quarter, or about $400 per month.

If you invest consistently throughout the year, you buy at both highs and lows of the market – sometimes you spend more for stocks and sometimes you buy at a discount. Over time, those highs and lows should average out.

This, in turn, can save you money. If you only invested when the market was booming, you would end up paying a premium for your stock and spending more in the long run.

In addition, if you invest during a market downturn, you can make significant profits when prices recover. The market has a long history of recovering from recessions and investing now can help you capitalize on the inevitable boom.

Dollar cost averaging in action

Let’s take a look to see just how powerful cost-per-dollar averaging can be Amazon (AMZN 1.00%). The company’s performance over the past five years has been volatile. At its all-time high in July 2021, it reached a price of about $186 per share (taking into account subsequent stock splits). At its lowest point in the past five years, it was priced at about $57 per share.

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If you had only invested during the high points of this roller coaster, you would have missed the opportunity to buy at bargain prices. On the other hand, if you had waited to invest between 2020 and 2022, when the stock rose, you would have avoided paying higher prices, but you would also have missed your position in the stock during that time.

However, by investing consistently during the ups and downs, you can get the best of both worlds. You don’t even have to worry about timing the market or making an investment decision. All you need to do is invest on a regular basis and hold your shares for a longer period of time.

Keys to long-term successful investing

Investing can be challenging when the market is volatile. But now is the time to take advantage of those low prices. The key to keeping your investment alive is to double check that you are buying the right stocks.

Not all stocks will withstand the fall of the market. But companies with solid underlying corporate fundamentals are most likely to weather periods of volatility and see long-term growth. These are the stocks to watch.

The more stocks you have in your portfolio, the more likely your investments are to boom. By investing consistently and keeping your money invested for the long term, you will be well on your way to building wealth over the long term – no matter what the future holds for the market.

John Mackey, CEO of Amazon subsidiary Whole Foods Market, serves on the board of directors of The Motley Fool. Katie Brockman does not hold any position in any of the listed stocks. The Motley Fool has the messages and recommends Amazon. The Motley Fool has a disclosure policy.

Source: news.google.com

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