What is dollar-cost averaging and why is it beneficial for investors?
Dollar-cost averaging is an investment strategy where investors set a fixed dollar amount to be invested on a regular basis (weekly, bi-weekly, monthly etc.)
This is a great option to help investors get more disciplined with contributing money to their investments regularly and helping to grow their investments.
Dollar-cost averaging is extremely convenient and it's a 'set it and forget it' approach. Once you select the dollar amount and frequency for your contribution to run, it will automatically do so continuously until otherwise instructed.
Another great benefit of dollar-cost averaging is buying the dips. As markets fluctuate, by dollar-cost averaging, you have the potential of purchasing units not only when markets go up, but also when they go down and thus may benefit from lower unit prices.
Smaller amounts do add up. It may be difficult for investors to contribute $10,000 a year as a lump sum, however it can be much more manageable for investors to contribute approximately $400 bi-weekly.
The charts below show the great benefits of DCA and how it can benefit investors.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Alison Cannell, for the benefit of Alison Cannell, Financial Advisor with Cannell Wealth Management Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.
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