Dollar Cost Averaging

Nervous about plunging into an investment? Dollar Cost averaging helps you get your feet wet and weather market storms.

A viable method of easing into the marketplace

WHAT IS IT?
Dollar cost averaging refers to purchasing a fixed dollar amount of a mutual fund or other investment on a regular schedule — regardless of unit price. More units will be bought when prices are low, while fewer units are bought when prices are high. By continually investing a set amount of money, dollar cost averaging often lowers the average share price paid as the market changes throughout the year.

THE BENEFITS
Starting off slow- As an investor, it can be worrisome to invest a large lump sum at one time. That's why dollar cost averaging can be a good strategy — because for many of us it's easier to come up with smaller investment amounts more often.

Minimizes risk - No one knows when the market will rise or fall, there is a risk of investing at the wrong time. Dollar cost averaging can protect you from market swings. Spreading your investment over time ensures marketplace surprises don't hit you all at once. Even if you're an experienced investor, dollar cost averaging gives you the opportunity to try riskier investments a little bit at a time.

Ride out market waves - As the name suggests, dollar cost averaging attempts to build your wealth by balancing the highs and lows. Although dollar cost averaging is a long term investment strategy, the chart below includes just six investments for simplicity.

A SENSIBLE APPROACH TO INVESTING
As with any investment strategy, it is important to consider the accompanying risks and rewards. At Rice Financial, we'll help you determine how dollar cost averaging can enhance your portfolio. Visit your Rice Financial advisor for more information on this and other investment and insurance opportunities.