What is Dollar Cost Averaging? (Simple Explanation)

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Are you curious to what dollar cost averaging means in regards to buying stocks, bonds, or any other investment? Then this video will teach you what dollar cost averaging means in under 5 minutes using a really simple example.

Most of us are doing dollar cost averaging with our 401(k) plans by contributing each month, but there are other ways to utilize dollar cost averaging besides your 401(k).

For more on dollar cost averaging, check out http://www.protectmyretirement.today/

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6 Comments

  1. Although there is a small mistake, Great Video. Thanks

  2. This is a strategy to reduce risk, but it does not give you a better return in general!
    If the stock is equally as volatile, but mirrored on the 10-line (8->12, 7->13, 11->9 and so on), and you leave the start and end fix, you end up with 111 shares instead of 120.
    Choose your entry point wisely, or just invest more when the chart is low and less when it is high. Always keep in mind, that Dollar Cost Averaging reduces the compound interest effect!
    But for people that don't have the time to look into the charts, this is a solid plan.

  3. Great concept bit I think you have to take trading fees into account. Where i live, it's approximately $10/trade. If you follow the DCA strategy and trade 12 times a year, you just ended up paying $120 in fees for your $1200 investment. I think DCA is a lot more beneficial when you have a large investment amount.

  4. 130.51 * 12 = 1566.12

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