The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. When the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares.
Over time, the average cost per share you spend will probably compare quite favorably with the price you would have paid if you had tried to time it.
Rewards of Dollar-Cost Averaging
In the long run, this is a highly strategic way to invest. As you buy more shares when the cost is low, you reduce your average cost per share over time.
Dollar-cost averaging is particularly attractive to new investors just starting out. It's a way to slowly but surely build wealth even if you're starting out with a small stake.
A Long-Term Strategy
Regardless of the sum you have to invest, dollar-cost averaging is a long-term strategy.
While the financial markets are in a constant state of flux, over long periods of time most stocks tend to move in the same general direction, swept along by larger currents in the economy. A bear market or a bull market can last for months or even years. That reduces the value of dollar-cost averaging as a short-term strategy.
In addition, mutual funds and even individual stocks don't, as a general rule, change in value drastically from month to month. You have to keep your investment going through bad and good times to see the real value of dollar-cost averaging. Over time, your assets will reflect both the premium prices of a bull market and the discounts of a bear market.
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