UK Accounting Glossary
Dollar-cost averaging is a long-term investment strategy in which a fixed dollar amount is added to an investment on a regular schedule, regardless of the market price of the security. Dollar-cost averaging is also called a constant dollar plan. Since an investment’s share price fluctuates, by following a dollar-cost averaging strategy, more shares are bought when the share price is low, and fewer shares when the share price rises. Over time, dollar-cost averaging results in a lower average cost per share than a plan that involves purchasing an equal number of shares at each interval. Dollar-cost averaging is a popular way to invest in mutual funds, and investing regularly through dividend reinvestment plans is a form of dollar-cost averaging. While dollar-cost averaging reduces the risk of investing a lump sum in a single investment at the wrong time, dollar-cost averaging does not guarantee the investor a profit.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Dollar Cost Averaging are sourced/syndicated and enhanced from:
This glossary post was last updated: 9th February 2020.