You may have heard the term “dollar cost averaging” when speaking about investing but do you really know what it means.
Dollar Cost Averaging is an investment strategy whereby you invest the same amount of money, at regular intervals (say monthly) regardless of the market price of the investment. By investing the same amount on a regular, consistent basis, you avoid trying to determine whether the market is going up or down. Studies have shown that investors who use this strategy tend to have a lower cost per unit.
Here’s an example of how Dollar Cost Averaging can work for you.
Setting up a savings plan to take advantage of this strategy is easy and available through various account types such as: Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), Registered Education Savings Plans (RESP) and more.