Use this 401(k) investing strategy to calm your market jitters
Investors who are skittish about the ups and downs of the stock market can borrow an easy 401(k) investment strategy to calm their nerves and be more disciplined with their money — and reap the potential financial benefits.
The strategy is called «dollar-cost averaging.»
It entails investing money in equal tranches and at regular intervals, regardless of what's happening in the market. Those who participate in workplace retirement plans like a 401(k) do this perhaps without even knowing, since a portion of each paycheck is invested automatically.
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Here's an example of how it works from the Financial Industry Regulatory Authority: Let's say you've saved $10,000 or received a $10,000 bonus. With dollar-cost averaging, you'd invest that money over time (perhaps by investing $1,000 a month for 10 months) instead of doing it all at once as a $10,000 lump sum.
Among the primary benefits of dollar-cost averaging: It strips the emotion out of investing.
«Doing a little bit over time will average out the good days and bad days [in the market] and make it a more palatable experience for you,» said Sean Deviney, a certified financial planner based in Fort Lauderdale, Florida.
Emotion can be a toxic force for investors. For example, the fear of losing money can trigger harmful behavior like trying to time the market, akin to guessing the best time to buy and sell.
Unfortunately, those efforts «often backfire,» according to Finra.
People often sell out of fear when stocks decline in value, and then miss out on
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