Dollar-Cost Averaging Strategy
Dollar-cost averaging” is a proven investment strategy that investors can use in their portfolios to help reduce the frustration that many face in trying to time the market. It is a strategy that sees investors buying shares / units in a pre-determined, or “fixed,” amount at regular intervals, say, on a monthly, bi-monthly, or even on weekly basis.
Sticking to a dollar-cost averaging
strategy means you’re going to have the benefit of purposefully ignoring any
fluctuations in the market as well as any fundamental factors, including
negative (or positive) stories you may read or see about online or in the media.
Dollar-cost averaging requires less capital up front
Another obstacle standing in the way of many investors getting involved in the market is that they may not have a lot of savings available to start investing.
dollar-cost averaging strategy can help to address this by only requiring you
to put in a little bit of money each time. However, in the end, those regular
commitments should end up being a sizable investment just the same.
Lowering your cost base
This could very well be the single biggest advantage of a dollar-cost averaging strategy in terms of its financial rewards.
Because you are committing a fixed dollar amount each period, you are going to end up buying fewer units of an investment when the price is high and more when the price is low.
Figuratively speaking, this should go a long way to help reduce the average cost base of your investments and, in doing so, boost your profits.