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Dollar Cost Averaging Why Dollar Cost Averaging? Dollar-cost averaging requires a consistent method of investing, regardless of whether the market is up or down over a period of time. So why do people use it? Reduce risk Because funds are being eased into the market instead of invested in a lump sum, there is less invested in the market if it drops. While dollar cost-averaging doesn't guarantee a profit or protect against losses in a declining market, it's a good way to help make the market's volatility work for you, rather than against you. Buy more Historically, stocks have risen over time, so those who used dollar-cost averaging now own more shares at less cost and at a higher value. Convenient Having money deducted from your paycheck or monthly from your checking account means you are automatically paying yourself first. If I increase contributions to my tax-deferred plan by just $50 a month, how much more would that give me for retirement? What about increasing contributions by $100 a month? See the Retirement Planning Quick Report. 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