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Dollar Cost Averaging
Home »  Annuities » Investment Concepts » Informed Investor's Guide

 
Over time, you buy more shares when the price is low and less when the price is high.
  The Informed
Investor's Guide
How Dollar Cost Averaging Works (continued)

Assuming the market rebounds (conveniently, let's say this happens in the third month) each share is again worth $10. Your third monthly installment buys another 10 shares, for a total of 32.5 shares.
Now watch how this strategy plays out. In three months, you've invested $300, which has purchased 32.5 shares. Your average purchase price is lower than if you had put all your money in the market at once (and purchased all 30 shares at the original $10 price).

The average price per share over the past three months ($28 divided by 3) has been $9.33, but your average cost per share ($300 divided by 32.5 shares) has only been $9.23.


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Copyright 2009 © Pacific Life and Annuity
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Dollar Cost Averaging
Home »  Annuities » Investment Concepts » Informed Investor's Guide

 
Over time, you buy more shares when the price is low and less when the price is high.
  The Informed
Investor's Guide
How Dollar Cost Averaging Works (continued)

Assuming the market rebounds (conveniently, let's say this happens in the third month) each share is again worth $10. Your third monthly installment buys another 10 shares, for a total of 32.5 shares.
Now watch how this strategy plays out. In three months, you've invested $300, which has purchased 32.5 shares. Your average purchase price is lower than if you had put all your money in the market at once (and purchased all 30 shares at the original $10 price).

The average price per share over the past three months ($28 divided by 3) has been $9.33, but your average cost per share ($300 divided by 32.5 shares) has only been $9.23.


<<Previous

Next>>


Copyright 2009 © Pacific Life and Annuity