Investing Strategies

Dollar-cost averaging

1

An investor that follows a strategy of dollar-cost averaging simply invests regularly into the market. For example, an investor following this strategy may decide to invest $100 a month, every month.

2

The benefit is that the investor can take advantage of a range of prices – they can invest when prices are both low and high. This results in an average investment price that is lower than just investing all at once. 

3

The stock market is often unpredictable and investors can make mistakes with timing, but dollar-cost averaging removes these risks as investments are made regularly, whether prices are low or high. 

4

A disadvantage of dollar-cost averaging is that it cannot be used to know whether an investment is worthwhile or not. You would have to use it in combination with another investment approach.

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