Dollar cost averaging is an investment strategy that can be used to alleviate risk. Investors invest a fixed dollar amount into an investment at a set interval to spread out the purchase over time. The investment typically continues each and every month over a long period of time, regardless of market volatility.
When the price of a given investment rises, investors purchase fewer shares as their funds do not reach as far. When the price of a given investment declines, investors are able to purchase more shares and receive more bang for their buck.
Investors benefit largely during bear markets when they can purchase an investment at a low point. Over the long term investors lower the risk of one large purchase at the peak of an investment.
Remember all investing involves risk. Schedule an appointment to speak with one of our financial advisors to determine if Dollar Cost Averaging is right for you!