Dollar cost averaging sounds like a terribly complex term, but
we’re going to break it down and make it very simple for anyone
to understand. In a nutshell, dollar cost averaging is buying an
investment little by little over a period of time. Now that
doesn’t sound so complex does it? Dollar Cost Averaging: A
Little More Detail Now that you have the general idea, we will
expound on that principle a little bit. When we say buying
little by little, that means that the investor has a system in
place of buying at certain timing intervals. For example, some
people buy weekly, monthly, or even quarterly. They generally
have a set amount that is going to be invested over a period of
several months or even years. Why Dollar Cost Average? The idea
is to reduce the risk to the investor. By making small purchases
over an extended period of time, the investor creates a buffer
of protection against changes in the market price. Let me
illustrate this with an example: Let’s say that stock A is
selling for $20, $22, $17, and