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Try DCA investments

By Joe Palumbo III

A hot topic now is the $700 billion bailout and how it will hopefully bring back the securities and real estate markets. The stock market is not making us feel good about our retirement.

Many Queens residents are nervous about their mutual funds. Many mutual funds in our retirement plans are down. This brings me to the term I hear more when the subject of investing comes up: dollar-cost averaging.

Market fluctuations influence your shares' cost when you make contributions to your mutual fund account. DCA may smooth out these effects when you invest in a fixed-income amount regularly, regardless of the stock market's performance.

The concept is designed to help reduce the risk of trying to time the market when buying shares. DCA involves continuous securities investment regardless of fluctuating prices. When the market is down, your cost per share is worth less, so your regular investments buy more shares during the market downturn. When the market turns around, your cost per share is higher, so you will get fewer shares for your money during the market upswing.

Making regular investments at fixed intervals can level off the market's peaks and valleys. DCA may decrease the average cost per share as opposed to the average price per share, so you may accumulate more shares for your money. You could also lessen the risk of making a lump sum contribution at a bad time.

So How's Business regarding DCA? There are always financial risks involved when investing in securities, which can include the possible loss of the principle you started with. If you choose DCA, consider your financial ability to continue purchases through periods of high or low price levels, especially in volatile and changing market conditions. DCA can limit loss and make money through trying financial times.

Reach Joe Palumbo at 516-248-0256 or info@camelotlimo.com.