What are the advantages of Dollar Cost Averaging?

    Published: 06-16-2009
    Views: 9,348
    David Marotta talks about how the Dollar cost averaging helps you enter the markets.

    David John Marotta

    David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

    Host: What are the advantages of dollar cost averaging?

    David Marotta: Dollar cost averaging helps you enter the markets. It also might help you exit the markets and it also helps you get a nice even price. The difficulty with buying all at once is if the markets were bouncing around and you might buy all at once when the markets were high and then you get an average cost that would be way up here when in fact the markets were bouncing around that here. So, it just ensures that you getting sort of the average cost. On the other hand, the markets were generally going up and if it generally going up, you might think it's best to buy all in the fund. It's nevertheless, if you get in a little bit of the time it will smoothly returns of the time.

    So, we recommend dollar cost averaging during your investment period when you are adding to your portfolio and then you do the same thing after you retire as you gradually getting out with sale a little bit in each month.