What is dollar-cost averaging and how can it relate to fund purchases?

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Multiple Choice

What is dollar-cost averaging and how can it relate to fund purchases?

Dollar-cost averaging is investing a fixed dollar amount at regular intervals, no matter what the market price is. The idea is to smooth out the effects of short‑term price swings and avoid trying to time the market. When this is used for fund purchases, you automate contributions to buy an investment on a set schedule (like every month). As prices rise, you buy fewer shares; as prices fall, you buy more shares, which can lower your overall average cost per share over time. This approach promotes discipline and can reduce the risk of making a large purchase right before a price decline.

Dollar-cost averaging is investing a fixed dollar amount at regular intervals, no matter what the market price is. The idea is to smooth out the effects of short‑term price swings and avoid trying to time the market. When this is used for fund purchases, you automate contributions to buy an investment on a set schedule (like every month). As prices rise, you buy fewer shares; as prices fall, you buy more shares, which can lower your overall average cost per share over time. This approach promotes discipline and can reduce the risk of making a large purchase right before a price decline.

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