Dollar
cost averaging,
sometimes called a constant dollar plan,
is a long-term investment strategy. With dollar cost averaging,
you invest the same amount in a particular investment on a regular
schedule. This is not just good discipline. By sticking to your
schedule, whether markets rise or fall, the average price you
pay for your stock or mutual fund shares may be less than the
average cost of the shares over the same period. That’s because
you’ll buy more shares when the price drops, reducing the
average price.
Remember, dollar cost averaging doesn’t
guarantee a profit or protect you from losses in a falling market.
But it’s an economical way to build your asset base.
