When it comes to saving and investing, most of us are not as disciplined as we would like to be. Some set some money aside for some months and then nothing at all for several others. Indeed after the stock market decline in 2008 many people stayed away from the market completely afraid of further losses; sadly they were still out of the market when it started to pick up and have already missed out on some of the gains from stocks that were selling at significant discounts. For the vast majority of people, the only way to achieve your financial goals is by earning through the dint of hard work and saving and investing in a systematic, disciplined way over several years.

Cost averaging, is a simple approach to saving and investing that helps you to save regularly whilst at the same time building long-term financial security. It involves investing a fixed amount on a regular basis rather than a lump sum, even when your finances are stretched, and no matter what the market is doing. This could be monthly, quarterly, or whatever suits you; you do not have to time the market or look for the best entry point, you just invest regularly.

Even for the most seasoned investor, it is almost impossible to time the market as it is challenging to anticipate correctly its peaks and troughs. For the average investor, and particularly for the smaller investor who does not have lump sums to invest, what is required is an investment strategy that allows you to maintain an even keel in rising, fluctuating and falling markets. Cost averaging accomplishes this and if you manage to apply this strategy to even a small amount of money, with ease and efficiency, you will have a better chance of achieving your goals.

Cost averaging is a particularly useful tool in choppy markets as it provides a buffer for volatility. Even though the value of your overall investments will fall as stock prices fall, remember that you also bought more shares at lower prices. As you will be drip-feeding your funds into the market at different times, you will be picking up investments at a range of prices; this reduces your overall average cost.

How much you can afford to set aside each month? The amount you choose will depend on your own particular situation. This could be a fixed amount each month, or you might prefer to invest a percentage of your income, so that you invest more as your income increases; try to invest at least ten percent of your income.

By Nimi Akinkugbe

Source: http://www.punchng.com/am-business/invest-regularly/