Introduction to Personal Investing

The Basics

Why is dollar cost averaging a beneficial strategy for investing?

When it comes to investing in such investments as mutual funds, the prices may fluctuate as the value of the underlying portfolio may increase or decrease. This fact, coupled with dividends from shares held within the portfolio as well as changes to fees that are charged to account holders, may change the price you pay to acquire shares. Through dollar cost averaging, you are able to acquire more shares if the price drops and fewer shares if the price increases. This means you reduce the risk of acquiring many shares just before a major decrease in the price of the shares, which helps mitigate your overall risk in these investments. Although it is relatively easy to employ dollar cost averaging when it comes to investing in mutual funds, some individual stocks also allow for the regular acquisition of shares. You should consult your investment adviser for specific information on using dollar cost averaging to acquire individual shares.


This is a web preview of the "The Handy Investing Answer Book" app. Many features only work on your mobile device. If you like what you see, we hope you will consider buying. Get the App