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By dollar-cost averaging, or making a consistent investment of $50 each month, you would have ended up with 64.61 shares. That’s near the middle point between buying low and buying high.
In both scenarios, dollar-cost averaging provides better outcomes: At $60 per share. Dollar-cost averaging delivers a $6,900 gain, compared to a $2,400 gain with the lump sum approach.
Dollar cost averaging: If an individual invested $500 per month into the stock market for 40 years at a 10% annual return rate, they would have an ending balance of over $2.5 million. Dollar cost averaging (DCA) is an investment strategy that aims to apply value investing principles to regular investment.
The strategy claims to free the investors from speculating in volatile markets by dollar cost averaging as the investor is getting more units when the price is low and fewer units when the price is high. In the long run, the average cost per unit is supposed to be lower. [1] SIP claims to encourage disciplined investment.
By dollar-cost averaging, or making a consistent investment of $50 each month, you would have ended up with 64.61 shares. That’s near the middle point between buying low and buying high.
If you’re dollar-cost averaging into a poor investment, the way you bought in won’t save you. The approach works best with broad-based funds such as an S&P 500 index fund, which has performed ...