Financial Glossary: Dollar Cost Averaging


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Dollar Cost Averaging

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Dollar Cost Averaging

Dollar Cost Averaging

Investment of a fixed amount of money at regular intervals, usually each month.

This process results in the purchase of extra shares during market downturns and fewer shares during market upturns. Dollar-cost averaging is based on the belief that the market or a over the Long term and that it is not worthwhile (or even possible) to identify intermediate highs and lows.

This is a technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are Low, and fewer shares are bought when prices are High. Also called as a "constant dollar plan".

Eventually, the average cost per share of the Security Will become smaller and smaller. Dollar-cost averaging lessens the Risk of investing a large amount in a single investment at the wrong time.

Known as "pound-cost averaging" in the U.K.

Posted by EBD Group AG

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