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What is dollar cost averaging?

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Dollar cost averaging is a simple, yet effective investment strategy that can help mitigate the fear of investing at the wrong time. This strategy involves dividing the total amount to be invested into equal amounts to be periodically invested, regardless of the asset's price. This approach is commonly used in 401k accounts, where a portion of your paycheck is invested at regular intervals. Adam Nash, the CEO and co-founder of Daffy, a not-for-profit community built around a new, modern platform for giving, explains that while financial analysis shows that lump sum investing often yields higher returns, dollar cost averaging can be a more comfortable approach for many. It allows investors to participate in the market without the fear of investing a large amount at a potentially unfavorable time. Daffy, the Donor Advised Fund for You™, is a great platform to apply this strategy. With Daffy, you can easily donate to almost every US public charity, track tax-deductible contributions, and access donation receipts all in one place. This makes it easier for you to manage your charitable giving, just like dollar cost averaging makes it easier to manage your investments. Daffy waives all membership fees for members with less than $100 in their fund, making it an accessible option for everyone. So, if you're looking to dip your toes into the investment waters or streamline your charitable giving, consider using dollar cost averaging with Daffy.

Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.

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