The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

What Is Dollar Cost Averaging ?

Dollar cost averaging is a systematic method of investing the same amount of money regularly over an extended period of time. For example, by investing $100 a month for five years in a mutual fund, an investor will be buying the fund at various price levels. The investor should not be concerned with the day to day fluctuations of the investment, but rather the general long term trend since he will be buying the fund on the dips as well as the upward fluctuations. All mutual funds provide for a method whereby investors can have a fixed monthly amount taken out of their bank or checking account automatically to implement dollar cost averaging. Speak to a CPA in your area to set this up.

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