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by Aquafina53 on April 16th, 2007

Aquafina53

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What's "Dollar Cost Averaging"?

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Answers. 2 helpful answers below.

  • by superdadbrad on January 28th, 2010

    superdadbrad

    Dollar Cost Averaging is a great technique to improve (lower) your average price of a stock. This gives you more profit per share when you sell.

    making money with dollar cost averaging:
    http://www.ehow.com/how_5294323_make-market-dollar-cost-averaging.html

    Then enroll your dividend stock into a reinvestment plan and your investment will really take off.

    enrolling in a Dividend Reinvestment Plan:
    http://www.ehow.com/how_5289084_enroll-dividend-reinvestment-plan.html

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  • by Beachside_FinPlanner on April 25th, 2007

    Beachside_FinPlanner

    Dollar cost averaging is a way to try to get a better average price for the purchase or sale of stocks.

    Method:
    Say you have 100 shares of GOOG. This is a pretty volatile stock. If you want to cash out you could sell all 100 shares at once, or you could sell 10 shares at a time over, say, a trading day. If GOOG goes up durring the day you'll have a higher average sale price selling 10 at a time over the whole day than if you sold all 100 shares at the start of the day (and a lower sales price than if you sold all 100 at the end of the day).

    The "Why":
    People use dollar cost averaging because they know they can't predict the market. It is especially useful for stocks that have higher volatilities compared with other stocks. It can help investors get a better (higher) sales price, or a better (lower) purchase price.

    It can also result in worse buy/sale prices depending on the direction the market goes.

    Either way, dollar cost averaging is an attempt to hedge against volatility in your investing.

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