Introduction to Personal Investing

The Basics

What is “dollar cost averaging”?

Dollar cost averaging is a simple timing strategy of investing, whereby an investor buys the same dollar amount of a stock at regular intervals (say $100 per month of a certain stock). If the price of an investment increases over time, we acquire fewer of these shares. Conversely, if the price of the investment drops, we acquire more of these shares. This lowers the total average price per share of an investment, meaning the investor is able to invest more profitably than if he were to “time the market.” Dollar cost averaging is a worthwhile investment strategy employed by many investors in order to fix the amount invested each period for the purchase of shares, or for the purchase of an investment.


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