What is Dollar Cost Averaging?

Dollar cost averaging is an investment strategy where an investor regularly contributes a fixed dollar amount into their investment accounts, regardless of the price of the assets at the time of the investment. Hypothetically, let’s say you decide to invest $100 per month. When prices are high, your $100 fixed investment buys fewer shares, and when prices are low, your fixed investment buys more shares. By consistently investing over time, you are essentially averaging the cost of your investments.

Over time, this averaging effect can result in a lower average cost per share. Since you’re investing at a regular rate, you don’t have to deal with the guesswork of choosing when to invest. You also don’t have the roller coaster of emotions that comes with watching the market, which is what often leads to bad financial decision-making. This strategy can help smooth out the impact of market fluctuations. Sticking to a consistent investment plan makes you less likely to be swayed by market hype or fear, and helps dissuade you from making impulsive decisions which could detract from your financial goals. 

Dollar cost averaging is a disciplined approach to investing that can be suitable for individuals who want to invest over the long term with a routine investment plan suitable for their needs. The best way to determine the right investment strategy for you is to speak with our team at Middlebrook Wealth. We are here to help you determine the best path forward to continued financial success. 

Advisory services provided by NewEdge Advisors, LLC doing business as Middlebrook Wealth, as a registered investment adviser. Securities offered through NewEdge Securities, LLC, Member FINRA/SIPC. NewEdge Advisors, LLC and NewEdge Securities, LLC. are wholly owned subsidiaries of NewEdge Capital Group, LLC.

The information in this material is not intended as tax or legal advice. Please consult your legal or tax professionals for specific information regarding your individual situation. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.