Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time.
This spreads the cost basis out over several years, providing insulation against changes in market price.
A- The Ever Increasing Pattern
B- The Down & Up Pattern
C- The Decline And Pattern to Original Price Pattern
Setting Up Your Own Dollar Cost Averaging PlanIn order to begin a dollar cost averaging plan, you must do three things:
- Decide exactly how much money you can invest each month. Make certain that you are financially capable of keeping the amount consistent; otherwise the plan will not be as effective.
Author is a certified Unit Trust Consultant (click here to view profile)