Dollar Cost Averaging
Dollar Cost Averaging Strategy | Definition
A policy by which the same dollar amount is placed in one or more common stocks at fixed successive intervals, thereby enabling the investor to average the purchase of his shares over a good many years. Assuming that each investment is of the same number of dollars, a greater number of shares are purchased when the price is low and fewer when it is high. Thus, a satisfactory average price is obtained which precludes the investor from buying all the shares at the high levels of the market.
Caution: Dollar cost averaging does not assure a profit or prevent a loss in declining markets. The investor should consider his/her ability to continue investing during low price levels.
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