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An Overview of Dollar-Cost Averaging in Uncertain Markets

Many economists have predicted a recession in 2025, and multiple news sources have cited several indicators supporting this projection. On December 18, 2024, the stock market shook investors, with the Dow Jones Industrial dropping more than 1,100 points or 2.5 percent. For long-term investors seeking to hedge against economic uncertainty, dollar-cost averaging may provide a solution.

In the dollar-cost averaging strategy, investors purchase securities in intervals as their value drops. This strategy works best when stocks experience dramatic price swings during a bear market. For example, investors in bear markets see stock prices moving downward. Their investment approach is to purchase stocks incrementally, not in one trade, as their value decreases.

Investors purchase a certain number in the first month and an additional amount in the next, repeating the process until they have purchased the amount of stock they desire as stock prices fall. Investors can buy monthly, quarterly, semi-annually, or annually. They decide how much stock they want and how frequently to invest. Some investors, not all, set up transfers through payroll allotments or banks. Ideally, dollar-cost averaging mitigates the impact of volatility on a portfolio by lowering the cost per share.

Any investor can benefit from the dollar-cost averaging approach, but it requires watching stock market performance, which long-term investors might not prefer. Therefore, novice investors can gain experience by using this method.

This strategy offers several benefits, including lowering a person's investment costs and removing pitfalls related to market timing. It also removes the emotional aspect of investing in the stock market. Regardless of market performance, investors invest a preset amount into predetermined stocks.

Dollar-cost averaging also presents opportunities for investing in stocks with a lot of value but at a lower cost, benefiting from bargain shopping by purchasing stocks incrementally instead of buying a lot during one trade.

Investors can lose money by investing incrementally instead of in lump sums. For instance, an investor has $10,000 to place in stock that will increase by 10 percent at the beginning of a 10-year term. If they invest $1,000 a year, at the end of 10 years, they will have a little over $7,500. However, if they invest the entire amount at once, the investor will have almost $16,000, which does not make long-term dollar-cost investing as lucrative.

Even with dollar-cost averaging as an option, investors must still research potential stocks. A drop in stock price can indicate a bad stock, so investors must monitor their picks to ensure they do not continuously invest in poor-performing stocks. Furthermore, predicting whether a stock will increase or decrease is impossible without research.

Financial expert Suze Orman recommends keeping the investment time frame between a year and two years. She also recommends using this strategy and investing in a mix of exchange-traded and mutual funds, both of which are pools of investments. Other experts state that if investors choose the dollar-cost average method, they must stick with it, regardless of how the market performs, to improve their likelihood of success.

With uncertainty surrounding the economy, inflation, and market volatility, investors have much to consider regarding their stock market investments. Dollar-cost averaging has become one investment approach investors can use during uncertain market seasons.

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Real Estate Offers Investors Multiple Advantages

Real estate investing offers an alternative to traditional stock market investment. Investors can invest in real estate through various methods, such as purchasing property, or indirectly through investment vehicles, such as real estate investment trust, which pools investor money together. Investors invest in real estate as it offers several benefits, such as wealth preservation.

Investing in property means investing in a tangible asset that tends to hold its value over time, unlike securities on the stock exchange, which experience volatility. Furthermore, as part of a portfolio, real estate can mitigate some of the adverse impacts of stock market volatility.

Many investors use their real estate investments to generate rental income. Some investors purchase commercial and mixed-use real estate to generate income through leases. As the property appreciates, property owners benefit from increased rents.

In many cases, real estate investments appreciate the longer investors hold onto them. Appreciation can mitigate the impact of inflation since inflation causes the prices of goods to rise or lose value. For instance, an investor with a property carrying a 30-year mortgage pays the same amount monthly amount unless the mortgage has a variable rate. The property's value appreciates as prices rise because of inflation, but the monthly payment remains unchanged. If the investor leases the property, they make money from rents that increase with inflation while their mortgage payment remains unchanged.

Next, real estate accumulates equity. As investors pay off the principal on their debt, they accumulate equity. For instance, a person purchases a home for $75,000 on a home appraised at $76,000. After the down payment, they own roughly $61,000. In 10 years, the person pays an additional $30,000 off, so they only owe $31,000 on the principal. At the same time, the house's value rises to $100,000, which translates into $69,000 in equity.

Over time, real estate has proven impervious to the factors that control the stock market, making it a stable investment. COVID-19 showed the strength of real estate investing, as it did not become vulnerable to geopolitical and societal factors. The stock market dropped, affecting several industries. Real estate suffered as well, with home sales becoming sluggish. However, property values still appreciated, and housing sales eventually rebounded.

Moreover, real estate investment offers investors certain tax advantages, including write-offs for interest paid on a mortgage. Property owners can also take property tax deductions, which can whittle down overall tax liability by writing off maintenance and home improvement costs.

Real estate investing can serve as a vehicle for acquiring more properties through mortgage financing. Acquiring the first property can simplify acquiring more properties, distribute risk across the entire portfolio, and generate income beyond the initial investment.

Finally, real estate offers investors a reliable way to diversify their portfolios, mitigating investment risk. However, investing in real estate has a few caveats, such as requiring substantial cash upfront. Furthermore, if investing directly, the investor must know about property management. Also, it takes longer to see returns regarding appreciation and rental income. Nonetheless, its benefits outweigh most disadvantages.

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Starting a Nursing Home Business

Healthcare in the United States is a profitable industry, generating approximately $2.8 trillion in 2022 alone. There are various sectors in healthcare, including nursing homes, that provide essential care and a comfortable environment for older adults. The skilled nursing facility market, as it is called, was worth around $181.74 billion in 2023.

Nursing homes, as with any other business, serve the interests of their clients, also called residents, and the interests of those managing and running these facilities. For the client, there are various expectations. First, nursing homes should provide a conducive environment for older adults to stay. Second, they should provide medical care to their clients. Such medical care also includes treating clients with dignity, especially for those living with chronic medical conditions.

As an aspiring nursing home business owner, your expectation is that it must bring in profits. Typically, nursing homes make a profit via services such as charging for specialized healthcare, charging room and board facilities, and, in some cases, government funding. Additionally, nursing homes can become part of programs such as Medicaid and Medicare, further subsidizing costs for residents.

Owning and operating a nursing home may differ from managing other businesses. For instance, you must consider factors such as facility maintenance, real estate considerations, and updating medical technology regularly. Real estate considerations here include aspects such as buying a building or renting one and real estate properties’ values in different locations.

There is no one-size-fits-all approach to owning and managing a nursing home. Nonetheless, there are a few basic steps you can take. The first thing is to acquaint yourself with knowledge regarding how such facilities are run.

Skilled nursing facilities are in the healthcare industry, where quality services are paramount, thus, they are highly regulated. Therefore, you must know the relevant federal and state regulations applying to you.

Federal and state regulators oversee nursing homes’ operations. Among the requirements they stipulate include the presence of professional healthcare personnel, including registered nurses and certified nursing assistants.

It is also crucial that you work with experts in various fields, such as financing experts, architects, and general contractors. These professionals provide guidance along the way. Importantly, they should all have working experience in the skilled nursing facility sector.

Another step is determining the most appropriate funding model. Different lenders have varying requirements. You should know such requirements, including using your available assets as security if you decide to get a loan. Also, you must assess your risk tolerance, which is the amount of loss that you can comfortably handle when making investment decisions. With these steps in place, a business plan will follow. The plan should detail your projected costs, such as startup costs, operating expenses, and expected revenue.

The findings of a market study should guide your business plan. Also, it is a good idea to hire a third-party expert to assess the market and advise you if a nursing home as a business idea is viable.

Moreover, you must consider business and legal aspects. These include business licenses, insurance, policies and procedures, involvement with banks, job descriptions, and relationships and agreements you will have with providers.