For the typical mutual fund buyer, the investment is not something that happens once and is then forgotten. He or she usually wants to invest a set dollar amount into the fund every month. Consequently, with the offering price changing daily, she might be able to buy 10 shares one month, not quite 11 shares the following, nine the month after that, and so on.

What is Dollar Cost Averaging?
Mutual funds typically allow for fractional share ownership for the dollar-cost averaging investor. Dollar-cost averaging is the discipline of buying a fixed dollar amount of a security or fund on a regular schedule regardless of share price or market direction.

  • Investors benefit from a lower average cost per share (total dollars invested over the year divided by number of shares purchased) than the average price paid per share (sum of share prices paid divided by number of purchases).

  • This demonstrates an efficient means of investing.


Mutual Fund Management

Related Articles
  1. Investing

    Dollar-Cost Averaging Pays

    Get the most out of your mutual fund by using this simple but powerful strategy.
  2. Trading

    Pros & Cons Of Dollar Cost Averaging

    The dollar-cost averaging approach helps investors avoid market timing but they give up some potential for higher returns.
  3. Investing

    Dollar-Cost Averaging With ETFs

    If you are investing small amounts regularly into an exchange-traded fund, be sure to do it right.
  4. Trading

    Take Advantage Of Dollar-Cost Averaging

    We explain how dollar-cost averaging offers protection and opportunity in a sinking market.
  5. Investing

    Why Dollar-Cost Averaging Is a Good Idea

    Dollar-cost averaging can help an investor cope psychologically with market ups and downs.
  6. Investing

    Investing $100 a Month in Stocks for 20 Years

    Learn how a monthly investment of just $100 can help build a future nest egg using properly diversified stocks or stock mutual funds.
  7. Trading

    Choosing Between Dollar-Cost And Value Averaging

    These are two investing practices that seek to counter our natural inclination toward market timing by canceling out some of the risk.
  8. Investing

    A Guide to Mutual Funds Trading Rules

    Make sure to review this guide on the dos and don'ts of mutual fund trading before you invest, including how trades are executed and which fees to look out for.
  9. Financial Advisor

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
Frequently Asked Questions
  1. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
  2. How can I purchase stocks directly from a company?

    There are a few circumstances in which a person can buy stock directly from a company. The following is meant to cover some ...
  3. How do university endowments work?

    Endowments represent money or other financial assets that are donated to universities or colleges. The sole intention of ...
  4. Is it possible to take the Series 6 exam without being sponsored?

    Unfortunately, the answer to this question is "No." The Financial Industry Regulatory Authority or FINRA (previously the ...
Trading Center