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Dollar Cost Averaging Introduction Dollar-cost averaging is simply the process of investing a sum of money systematically over a period of time, rather than all in one lump sum. When share prices are down, your investment buys more shares; the reverse is true when share prices are rising. Let's look at an example: Kathie has $300 to invest. Instead of investing the entire amount in a lump sum, she invests $100 a month for three months. At the end of three months, Kathie has invested a total of $300, and she owns 43.33 shares. Had she invested the entire $300 in January, she would have purchased a total of only 30 shares, instead of 43.33 shares, and would have paid $10/share instead of only $6.92/share. Dollar-cost averaging does not assure a profit and does not protect against loss in declining markets. This type of plan involves continuous investment in securities regardless of fluctuating price levels, so investors should consider their financial ability to continue their purchases through periods of both high and low price levels. < PREVIOUS NEXT > #38599