WHAT IS DOLLAR COST AVERAGING? - ProProfs Discuss
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What is dollar cost averaging?



Asked by Forester, Last updated: Nov 28, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

From the interactive glossary, dollar cost averaging refers to investing a fixed amountof dollars in a specific security at regular set intervals over a period of time, thereby[hopefully] reducing the average cost paid per unit.for example if you buy 100 shares at $10 and another 100 shares at $8, your averagecost would be $9 rather than the original $10 you paid when you first started buyingsharesthis technique would increase the unit cost if prices were rising. dollar cost averagingreally refers to averaging the cost per unit as a result of multiple purchases. since itsa popular way to reduce the average cost by purchasing more units at lower prices,thats why the term is often associated with lowering costs.
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