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Dollar Cost Averaging

Dollar-cost averaging refers to the practice of systematically investing equal amounts, spaced out over regular intervals, regardless of price.

I’m sure that it is more than 20 years since I first heard the term and after repeating what I had heard, namely that it “is a foolproof system”, I arranged to prove to myself that the system is indeed foolproof.

All the guesswork is taken out of using the system and it works as well with a single investment as it does with a managed fund whose investment spectrum spans hundreds or even thousands of individual companies held somewhere among the huge range of mixed investments offered by all platform operators. With a single company the system is operated with no work on your behalf when the company offers a dividend reinvestment plan.

A long-standing client called in the other day to say thank you for the suggestion I made when his daughter got married 20 odd years ago. He bought her 1,000 shares in a company with a D.R.P operating. The $4,000 he invested for her is now represented by just over 6,000 shares worth $55,000.

I hope his daughter does the same thing for his grandchildren.