Best Time for Investing Now? Try Dollar Cost Averaging

Global stock markets fell sharply over the last week. In particular, Asian markets, which had enjoyed a strong run-up over the past few months, made steep declines, halted by some buying in today's trading.

With the dip in market prices, is it the right time to pick up some shares that are as much as 20% cheaper than they were a week ago? It appears the worst might be over, and the economy continues to move along strongly. However, liquidity amongst the retail investors might is also thinning with each fall - there are also fears that this might be a technical rebound, and the risks from here are growing with each passing day.

Trading in markets that are liquidity driven and therefore subject to short term swings brings about an interesting challenge. Get the timing right, and you'll get superb short term returns, get it wrong, and you're quickly out of the game.

The best way to trade these markets is not to trade at all.

Yes, you read that right. Most investment experts would advise that for a long term investment plan, the best strategy would be to adopt dollar cost averaging. To recap, dollar cost averaging means that when prices fall, the investor buys more of the stock, and when prices are high, the investor buys less. In the long run, as long as prices continue on a rising trend, the investor will come out on top.

This simple strategy is even more effective in volatile markets, for extreme swings means that you get in at the cheapest prices, which should give you good reward over the longer term.

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