Dollar Cost Averaging

admin — Mon, 11 Feb 2013 19:06:24 +0000

What is Dollar cost averaging? This quite simply is something that is used to average out market investments. Dollar cost averaging allows the investor to invest a certain regular dollar amounts on a regular basis. This is something that averages out the investments over time so there is a certain dollar amount one are investing on a regular schedule. For instance, an investor might put down 100 dollars monthly over a period of a year.
This strategy allows the purchaser to buy more shares when the costs are low. The overall point of dollar cost averaging is to average out cost of shares for the investor, and to sell when the market rises.The investor has to make a few decisions prior to implementing the plan. One is the fixed dollar amount they choose to invest, the overall frequency of the investments, and the time period over which the investments are made. Most investors will opt for a six month or 12 month investment strategy.
Many people will opt to use this strategy when the market is trending down. As the market tends to rise the investors will tend to sell their shares. Financial gurus are divided on whether this is a good investment strategy. Most tend to think that it reduces the risk faced by investors. Some think it is a marketing gimmick and that investors may actually be fooled into thinking they are investing less than they would if investing a lump sum. Other investors think that investing in this way is something that can make large investments affordable for the average consumer. Many individuals considering this strategy should discuss this with their financial advisor to see if this strategy is something in keeping with their overall investment goals. dollar cost averaging is strategy that seems to be helpful to the average investor.

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Dollar Cost Averaging