dollar cost averaging

Definition

An investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased in fixed dollar amounts at regular intervals, regardless of what direction the market is moving. Thus, as prices of securities rise, fewer units are bought, and as prices fall, more units are bought.

also called constant dollar plan.

Use this term in a sentence

The dollar cost averaging strategy was effective for our firm so we decided to promote the analyst who suggested this.

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You should try to run some dollar cost averaging to make sure that you are getting the most you can from your product.

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I have implemented a dividend reinvestment plan on the bulk of my stocks that allows the benefits of dollar cost averaging.

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