When's a good time to invest? Today, tomorrow and the next day, when you follow the strategy of dollar-cost averaging.
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How it works
Dollar-cost averaging works on the simple premise that investing a steady dollar amount lets you purchase more shares when prices are low and fewer shares when prices are high. It's a time-tested method that may enhance your investment results.
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In the example below, by dollar-cost averaging Bill paid an average of $9.29 per share over a five-month period - when shares actually averaged $10.00 per share.
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| Month |
Market Price of
Hypothetical
Investment |
Bill's Periodic
Investment |
Shares Acquired by Bill |
| January |
$10.00 |
$100.00 |
10.00 |
| February |
$6.00 |
$100.00 |
16.67 |
| March |
$10.00 |
$100.00 |
10.00 |
| April |
$14.00 |
$100.00 |
7.14 |
| May |
$10.00 |
$100.00 |
10.00 |
| |
Total |
$500.00 |
53.81 |
Average Market
Price:
$10.00 Per Share |
Bill's Average Cost:
$9.29 Per Share
($500/53.81) |
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This chart is for illustrative purposes only and is not representative of any specific investment. Actual rates of return and principal value will vary. Alternative investments assume different levels of risk and potential return.
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Of course, periodic investment plans do not assure a profit or protect against a loss in a declining market. This type of plan involves continuous investment in securities regardless of fluctuating principal. Investors should consider their financial ability to continue purchases through periods of high price levels.
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An easy strategy to follow
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When it comes to investment ease, dollar-cost averaging is hard to beat. In fact, you probably do it already if you make regular paycheck contributions to an employer's retirement plan.
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You can dollar-cost average on your own by setting up an automatic investment program into First American Funds. Contact your financial professional to get started.
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Want more reasons to dollar-cost average?
Read about more benefits of continuous, systematic investing: |
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For more information - consult a financial
professional
For more information about how dollar-cost averaging
can help you achieve your goals, make an appointment with a financial
professional today.
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| Mutual fund investing involves risk; principal loss is possible. Dollar cost averaging does not assure a profit or protect against loss in declining markets. Also, because such plans involve making continuous investments regardless of fluctuating share prices, you should consider your financial ability to continue making purchases through periods of low prices. |
