What is dollar cost averaging?

    Published: 06-16-2009
    Views: 16,288
    David Marotta talks about the Dollar cost average.

    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 is dollar cost averaging?

    David Marotta: Dollar cost averaging is a way of getting into markets slowly. So, you might buy a 100 dollars with mutual fund every single month. If the mutual fund is up in price you are buying less shares and if the mutual fund is down in price you are buying more shares and so dollar cost averaging ends up trying to buy more shares when the markets were down and less shares when the markets were up and if you do that over a period of year and if the markets were bouncing around you will get a nice average price on the whole thing.