Take the Guesswork Out of Investing
It’s one of the key strategies for long-term investors. And you might be doing it already, without even realizing it. Read on to find out more about dollar-cost averaging...
What is dollar-cost averaging?
Dollar-cost averaging is an investment technique often used with mutual funds. Investors contribute a predetermined dollar amount to their accounts at regular intervals - for example, by making an automatic purchase on the same day each month.
Why should I be interested in dollar-cost averaging?
There are several potential benefits of dollar-cost averaging. You’ll purchase fewer shares when prices rise and more shares when prices fall. Over the long run, the average cost you pay for the shares may be less than the average price. Keep in mind that dollar-cost averaging does not ensure a profit or protect against loss in declining markets. Since dollar-cost averaging involves making continuous investments regardless of share price fluctuations, you should consider your ability and willingness to continue making purchases through periods of low or falling price levels and markets.
Dollar-cost averaging may also help you reduce risk and take the emotion out of investing decisions. By investing regularly, rather than trying to move in and out of the market at the right times, you avoid the risk of missing the market’s best-performing days.
