Definition of "Dollar Cost Averaging"

A financial strategy of making investments in a variable annuity at regular intervals with a fixed dollar amount. A key benefit is that over time, your average per unit cost should be lower than either the market high or the average price. Dollar cost averaging does not guarantee a profit or protect against a loss. It involves continuous investment in securities regardless of fluctuating prices. You should consider your financial ability to continue purchases through periods of low price levels.

An investment timing strategy where an investment of a constant amount is made in the same security or mutual fund at regular time intervals, regardless of the market prices or conditions. Also see Example Of Dollar Cost Averaging.

An investment method that involves consistently buying at regular intervals equal dollar amounts of a security, rather than a certain number of shares, regardless of the price. As a result, more shares are bought when prices are low than at high prices. Thus, the average cost is less than the average of the prices paid. However, the method does not guarantee a profit. The investor only profits if the sale price exceeds the average cost per share.