Percentage in Point

Posted: 21 Feb 2011 07:15 AM PST

The choice of dollar cost averaging is a best investment option for the common investors who would like to have more of their contribution and management on their funds as compared to mutual funds or 401K. In fact, the dollar cost averaging is an excellent approach even for the investors who would like to keep them abreast with stock market, but cannot afford to invest a huge amount of cash at a certain point of time.

Dolar cost averging

Fundamentals of Dollar Cost Averaging

The basic idea of dollar cost averaging is very easy to understand. The investors make their decisions regarding; how much investment they would like to make and in which particular stocks. They also need to decide about the frequency of buying shares. After deciding about these things, the investors just make an investment portfolio and relax. For instance, if an investor would like to make an investment of US$150 on monthly basis in some firm or may be couple of organizations, he can do so.

In a very little time, they will make their personal small investment portfolio which they can administer more efficiently as compared to inactive investment plans of mutual funds and 401k.

Benefits of Dollar Cost Averaging

Conceivably the major benefit of this investment plan is that it facilitates the routine investors to stay away from the risky situation that is intrinsic for making investment in stocks. By allotting a fix sum of money to make investment on monthly basis, the investors are bound to purchase a less number of stock shares in case of increase in share price and purchase more shares when price goes down. This supports in managing the stability with the oscillation of stock prices. In fact the stock prices have varied a lot presently

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It really does not matter what is advised by the investment expert or the finance manager to the investor, because it is not always viable to watch the share market. Even in the preceding two years the behavior of stock market has been highly unpredictable. It had reached to a very high index, plunging to 50% and again rises by 50% really in a very short time. Those investors who opted out from the stock market were devastated by not taking benefit of large amount o profits. Those who kept on making investment during boom, find the sharp decline in their share price even up to 50%. On the contrary, the investors who have followed the strategy of dollar cost averaging might have gone through some loss of cash during the extreme bad market, but their loss was not as big as that of regular market players.

Investment Achievement

Although, it is not a magical phenomenon, but the strategy of dollar cost averaging for making some cash, has never been unsuccessful. It bestows the normal investors with an opportunity to make investment for a longer period of time and make money in the unpredictable stock market. These investors make their choices astutely and adopt a steady and reliable tactic to garner the remuneration.

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