Money Matters! What is Dollar Cost Averaging?

Sarah Riegelhuth

Finance Expert

02/12/2014

Have you ever heard of the term 'dollar cost averaging’ before? If not, you wouldn't be the only on! We hadn't heard of it either, until our Finance Expert Sarah Riegelhuth explained it's all about “investing little by little over time instead of one lump sum”. 

So what is Dollar Cost Averaging?

The idea behind dollar cost averaging is to invest small sums of money regularly, regardless of how the market is behaving. The idea is that by doing this, eventually your income will increase. This is how Sarah explains it…

“We all do this when you think about it.  We have no control over when our employer makes a Superannuation contribution on our behalf.  The money just goes in and it’s invested by the Fund Manager the day that it hits the fund”, she said.

Don’t feel bad if you haven’t heard of this term before, we were pleased that even Sarah recognises that dollar cost averaging is a geeky term.  Now we know what’s involved, we think this makes perfect sense too.  Thanks Sarah!

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