The objective of Dollar Cost Averaging is to
invest a set amount of money at regular intervals so the average
cost of shares tends to even out the market's peaks and troughs.
Your dollars purchase fewer shares when the market is up and they
buy more when it's down.
You will not achieve the positive results of
buying at the market's low point and selling at its high point,
neither will you suffer the consequences of doing the opposite. In
a generally rising market, you have the opportunity to accumulate
wealth over time in a systematic, organized way.
In the long run, it doesn't matter when you
start, just that you start. Over a period of years, it makes
little difference whether the market was up or down when you
began. The market has averaged almost 10% growth since 1929, even
when you include the sustained decline of 2000.
Making monthly additions to your account allows
you three times as many opportunities to benefit from favorable
market swings as investing on a quarterly basis. It also provides
you with three times as many chances to buy in a decreasing
market. The more frequently you invest and the longer you keep
investing, the smoother the average-share-cost line becomes.
Dollar-Cost
Averaging