The Beginning Investor's Kit

It's no secret that a strong gut is a prerequisite for investing in the stock market. Market indicators frequently move 10 percent in either direction. And most of us seldom have a giant bankroll to throw into the market at any given time.

So What's an Investor to Do?
One way to smooth out the market's swells and to take advantage of the "pay yourself first" rule is to dollar cost average.

Simply put, dollar cost averaging is investing the same amount of money on a regular basis--once a week, twice a month, monthly or quarterly--in a stock or a mutual fund, regardless of the share price of that stock or mutual fund.

Why Would You Do That?
For a couple of reasons. First, a regular investment program is a good way to build wealth. Many of us only have a few dollars, or a few hundred dollars, to invest every month. For example, investing $150 per month means you're putting $1,800 to work for you annually.

Second, investing takes discipline--particularly staying with the market when it's falling. A program of investing monthly, despite the market's direction, is a way to stick with the market during downturns.

Next: How Does It Work?