Importance of Dollar Cost Averaging

Dollar cost averaging is a strategy of buying a fixed dollar amount of investments on a regular schedule, thereby spreading out the investment over time. It is a natural approach for those contributing to their 401(k) accounts regularly. The frequency of dollar cost averaging can vary, but consistency is more important than the specific time interval. This strategy works because, over time, the market tends to go up, and dollar cost averaging allows investors to buy at lower prices when the market is down and benefit from market gains when it goes up.