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Article: Dollar cost averaging an easy way to buy on the dips.(Knight Ridder Newspapers)
- Article from:
- Knight Ridder/Tribune News Service
- Article date:
- May 20, 2002
- Author:
CopyrightCOPYRIGHT 2002 Knight-Ridder/Tribune News Service. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Q. I've heard that many investment advisors recommend something called dollar cost averaging. What is it?
A. It's a fancy name for a very good and widely used investment strategy _ adding the same amount of money to one's investments at regular intervals, such as every month.
There is a mathematical case to be made for dollar cost averaging, which I'll describe in a moment. But first, I'll mention another important benefit _ discipline.
If you commit yourself to invest, say, $200 on the first of every month, you can avoid the pitfalls of procrastination. Without such a commitment, there's a tendency to skip investments whenever some other use ...