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Dollar Cost Averaging:
The concept of Dollar Cost Averaging is all about investing a fixed amount of money each month for a certain period of time. As share prices go up and down, the number of shares that you can purchase with this fixed amount will vary each month. When share prices are high, you will be able to buy fewer shares, and when they are low, you can buy more.
If we actually see the investment market, investors generally buy shares irrespective of the market conditions. Investors buy when the market is down or on top. Most investment professionals will tell you buy when the market is going up and sell when the market is going down in addition to diversification. Diversification according to investment gurus means spreading your investment over many sectors to reach stability. If one sector goes down, another will go up. Although this method helps investors to reach stability, it can really hurt the growth of funds.
If one sector is going up and another is going down, your portfolio is not going anywhere. Any diversification you do should be coupled with balanced analysis. You should diversify only among sectors that are going up.
Long Term Buy and Hold :
If you check investment programs, you will see that most of them are based on buying and holding. In other words, you invest now for your future. Usually you will be encouraged to certain amount of money each year (or month) and then you are asked to forget about it completely until you retire.
This may not be the best way forward. What you think is a good investment for your future might not really be, and your long term investments end up being short term ones that are not doing well and you will keep holding onto them instead of selling.
Investments that are not being managed actively are not investments. They are long term gambles. If you sell investments that are not doing well, you will actually enhance the performance of your portfolio.
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