Dollar Cost Averaging

By investing a fixed sum at regular intervals throughout their working years, perhaps increasing that sum from time to time as their income rises, investors can largely forget about market trends. That's because they'll automatically buy more shares when prices are low, and fewer when they are high, and they'll benefit from the long-term rising trend in the market. This investing technique is called dollar cost averaging. It's a little like systematic saving, except that money is put into stocks (or mutual funds) instead of a bank account. However, some investors try to apply the dollar cost averaging principle to the investment of lump sums, by spreading their buying out over a period of time. That's different. This gradual buying is sometimes referred to as 'averaging in'.