Definition for: Dollar-Cost Averaging
"Dollar cost averaging" refers to an investment strategy of buying securities in fixed dollar amounts at scheduled intervals, with the aim being to reduce the risk of paying too high a price for a share of stock at any given time. For example, an investor could commit to investing on the first day of each month $1000 in a particular security or mutual fund. Dollar cost averaging is intended to reduce the risk of choosing a wrong time to get into a stock or mutual fund. Despite its advantages, dollar cost averaging does not guarantee a profit and does not protect an investor from losses.
