Why Dollar Cost Averaging Is the Best Strategy For Any Bear Market

Dollar Cost Averaging is one of the more practical approaches to investing, especially when you take into consideration that Bear Markets are an inevitable part of the economic and investing cycles.

Dollar Cost Averaging is simply a method of consistently buying investments at regular intervals (i.e. monthly).

This gives the investor a very unique opportunity, especially in a Bear Market.

As can be seen in the image above, a Bear Market is a downward trend in the prices of any given market. These moments in time are often referred to as “Corrections”.

For investors who don’t take the Dollar Cost Averaging approach – investors who large chunks of investments at a time, instead of spread out purchases over time – a Bear Market can be a tricky environment.

You don’t want to buy too early in the correction because your investment value would continue to drop, and you don’t want to buy too late because you’d miss the tremendous discounts.

It’s a guessing game, and even though many big time investors make very educated guesses, they can never actually predict when the whole thing is going to bottom out.

This is where Dollar Cost Averaging comes in very handy.

Since we can’t predict what’s going to happen with the market, but we do know for sure that we’re in a Bear Market, the one thing that we can do is to buy regularly.

And in the example in the image above, we’re looking at 4 purchases in a Bear Market, and we see that in the final month, the market hasn’t even recovered to its previous high point.

Month 1 – $100 Invested –  Share Price $100 – 1 Share Purchased

Month 2 – $100 Invested – Share Price $50 – 2 Shares Purchased

Month 3 – $100 Invested – Share Price $25 – 4 Shares Purchased

Month 4 – $100 Invested – Share Price $50 – 2 Shares Purchased

Total Investment: $400
Total Shares Purchased: 9
Total Investment Value: $450

What this shows us is that even in a downward trend, it can be beneficial to make regular purchases.

To See How Dollar Cost Averaging Can Benefit Your Investment & Retirement Strategy, >>Register Here For a Free Financial Planning Session With One of Our State Certified Financial Consultants.<<