Dollar Cost Averaging

Dollar Cost Averaging (DAC) Also known as the constant dollar plan is the idea that putting a small monthly payment into the market can bring you good returns. But how great is it?

The idea is by putting your money into the market on regular intervals you catch the markets highs and lows and get a good average. Unlike if you just put a lump sum of money into the market.

The disadvantage is that dollar cost averaging often gives you lower returns then putting in a lump sum, and that finding the best time to invest often outperforms both lump sum investing and DAC.

That said there is still a time when you can take advantage of this strategy.

This theory works great when you don’t have a lump sum to invest with. Instead taking a few hundred dollars a month and investing it into the market can help you invest for retirement by constantly letting you get into long term investments.