What does Dollar Cost Averaging mean?

Definitions for Dollar Cost Averaging
dol·lar cost av·er·ag·ing

This dictionary definitions page includes all the possible meanings, example usage and translations of the word Dollar Cost Averaging.

Wikipedia

  1. Dollar cost averaging

    Dollar cost averaging (DCA) is an investment strategy that aims to apply value investing principles to regular investment. The term was first coined by Benjamin Graham in his book The Intelligent Investor. Graham writes that dollar cost averaging "means simply that the practitioner invests in common stocks the same number of dollars each month or each quarter. In this way he buys more shares when the market is low than when it is high, and he is likely to end up with a satisfactory overall price for all his holdings." Dollar cost averaging is also called pound-cost averaging (in the UK), and, irrespective of currency, unit cost averaging, incremental trading, or the cost average effect. It should not be confused with the constant dollar plan, which is a form of rebalancing investments. The technique is so called because of its potential for reducing the average cost of shares bought. As the number of shares that can be bought for a fixed amount of money varies inversely with their price, DCA effectively leads to more shares being purchased when their price is low and fewer when they are expensive. As a result, DCA can lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time. The alternate strategies are to purchase a fixed number of shares each time period, or to save up the funds that are available for investment and attempt to purchase shares at times when the market is low, ie market timing. A major advantage for the investor using DCA is not having to make a decision on a day to day basis about the best time to invest the funds, but there are obvious advantages in simplicity and also in promoting habitual or automated regular investing.

Wikidata

  1. Dollar cost averaging

    Dollar cost averaging is an investment strategy for reducing the impact of volatility on large purchases of financial assets such as equities. By dividing the total sum to be invested in the market into equal amounts put into the market at regular intervals, DCA reduces the risk of incurring a substantial loss resulting from investing the entire "lump sum" just before a fall in the market. Dollar cost averaging is not always the most profitable way to invest a large sum, but it minimizes downside risk. In essence, the technique works in markets undergoing temporary declines because it exposes only part of the total sum to the decline. The technique is so-called because of its potential for reducing the average cost of shares bought. As the amount of shares that can be bought for a fixed amount of money varies inversely with their price, DCA effectively leads to more shares being purchased when their price is low and fewer when they are expensive. As a result, DCA can lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time. Dollar cost averaging is also called the constant dollar plan, pound-cost averaging, and, irrespective of currency, as unit cost averaging or the cost average effect.

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Numerology

  1. Chaldean Numerology

    The numerical value of Dollar Cost Averaging in Chaldean Numerology is: 1

  2. Pythagorean Numerology

    The numerical value of Dollar Cost Averaging in Pythagorean Numerology is: 5

Examples of Dollar Cost Averaging in a Sentence

  1. Gavin Smith:

    Dollar cost averaging is a great tactic for investors who want to invest and hold digital currencies over the long term.

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"Dollar Cost Averaging." Definitions.net. STANDS4 LLC, 2024. Web. 28 Mar. 2024. <https://www.definitions.net/definition/Dollar+Cost+Averaging>.

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