A Steady Approach When Headlines Aren’t

---

If the past few months have felt uncertain, you’re not imagining it.

Between geopolitical tensions in the Middle East, rising energy prices, and renewed concerns around inflation, markets have responded with increased volatility. While these developments can feel unsettling, they’re also a reminder of something important: uncertainty is a normal part of investing.

In fact, recent market behavior has followed a familiar pattern. Even with geopolitical shocks, markets have remained relatively orderly, with volatility staying within historical norms and long-term trends largely intact.

Therefore, the question becomes: how do you continue investing when the environment feels anything but predictable?

One answer is a strategy built specifically for moments like this: dollar-cost averaging.

What Is Dollar-Cost Averaging?

Dollar-cost averaging (DCA) is a simple, disciplined investment approach: you invest a fixed amount of money at regular intervals, regardless of what the market is doing.[i]

Instead of trying to decide the “perfect” time to invest, you spread your investments out over time.

That means:

• When prices are lower, your fixed investment buys more shares
• When prices are higher, it buys fewer

Over time, this can help smooth out your average cost and reduce the risk of investing everything at a market peak.

Why It Works, Especially in Volatile Markets

Volatility tends to create hesitation.

When markets drop, the instinct is often to wait. When markets rise, the concern becomes whether you’ve already missed your opportunity.

Dollar-cost averaging helps sidestep both reactions.

By committing to a consistent schedule, you remove the need to make repeated judgment calls based on short-term market movements. This can be especially valuable during periods like today, where headlines change quickly and market reactions can feel unpredictable.

It also reinforces a key principle: investing is not about reacting to every moment: it’s about participating over time.

The Behavioral Advantage: Taking Emotion Out of the Equation

One of the biggest challenges investors face isn’t a lack of information. It’s managing emotions.

Market swings can lead to second-guessing, hesitation, or reactive decisions. And historically, those emotional decisions have often been more damaging than the volatility itself.[ii]

This strategy helps create structure.

It turns investing into a habit rather than a series of high-stakes decisions. And in doing so, it helps investors stay engaged during both up and down markets, something that has consistently been key to long-term success.

What it Doesn’t Do

It’s important to be clear: dollar-cost averaging isn’t a guarantee of higher returns.

In steadily rising markets, investing a lump sum earlier can sometimes lead to better outcomes because more money is exposed to growth sooner. DCA also doesn’t protect against investing in the wrong assets or eliminate the possibility of loss.[iii]

But what it does do is manage timing risk and behavioral risk, two factors that can significantly impact long-term outcomes.

A Real-World Example

Let’s say you have $12,000 to invest.

Instead of investing it all at once, you decide to invest $1,000 per month over the next year.

If the market dips during that period, your later investments purchase more shares at lower prices, thereby potentially reducing your overall average cost.

If the market rises, you’re still participating consistently rather than waiting for a “better” entry point that may never come.

Either way, you’ve removed the pressure of trying to predict what happens next.

Why This Matters Right Now

Today’s environment is a perfect example of why strategies like dollar-cost averaging exist.

Geopolitical tensions can drive short-term volatility, particularly through energy markets and inflation expectations. But historically, these events have tended to create temporary disruptions rather than long-term structural changes to markets.

Markets are forward-looking. They process information quickly and often stabilize before uncertainty fully resolves.

That means waiting for “clarity” can sometimes mean missing the recovery.

Staying Focused on the Bigger Picture

Over the past century, markets have navigated wars, crises, and global uncertainty while continuing to grow over time. The driving forces behind that growth (earnings, innovation, and economic expansion) persist regardless of short-term disruptions.

Dollar-cost averaging aligns with that reality.

It’s not about predicting what happens next week or next month. It’s about staying invested long enough to benefit from long-term growth.

Final Thoughts

Periods of uncertainty can make investing feel more complicated than it needs to be.

But often, the most effective strategies are the simplest – and the most consistent.

Dollar-cost averaging is one of those strategies. It doesn’t rely on perfect timing or perfect information. Instead, it creates a disciplined path forward, even when markets feel uncertain.

At Larson Financial, our approach is built on long-term thinking, thoughtful planning, and disciplined execution. Strategies like dollar-cost averaging are just one way we help investors stay focused on what matters most: progress toward their goals.

If you’d like to talk through how this approach fits into your overall plan, we’re always here to help.

[i] https://www.schwab.com/learn/story/what-is-dollar-cost-averaging

[ii] https://www.americancentury.com/insights/dollar-cost-averaging/

[iii] https://www.investopedia.com/articles/forex/052815/pros-cons-dollar-cost-averaging.asp