A look at dollar cost averaging
If you start looking around for info on investing you are bound to come across the term “dollar cost averaging.” You may or may not be familiar with this term. This post is mainly for those of you that are not certain what dollar cost averaging is. 
As I am sure you know, the market can be rather volatile. If you are buying shares of an investment they could be $25 today and $45 three months ago. If you had say $5000 to invest and you invested it all three months ago you would probably be a little upset that the shares have a cheaper buy-in today, right? Well, with dollar cost averaging you would get less of a punch from that volatile market.
Here is how dollar cost averaging works – you invest equal amounts regularly. This means that when prices are low you get more shares than when prices are high. Overall that lowers your average cost per share. That is a good thing as it means that over time you end up getting more for your money!
Here is a simple illustrated example of dollar cost averaging in action:
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$100 invested per month. Total invested: $600 |
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| Number | Avg. market | Your avg. | ||||||
| Jan | Feb | March | April | May | June | of shares | price per share | cost per share |
| $10 | $12 | $14 | $16 | $18 | $20 | 42.25 | $15.00 | $14.20 |
| $10 | $12 | $5 | $5 | $8 | $10 | 85 | $7.67 | $7.06 |
| $10 | $12 | $6 | $4 | $4 | $7 | 103.5 | $6.50 | $5.80 |
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