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Dollar Cost Averaging
Dollar cost averaging takes the emotion and guesswork out of market ups and downs. It is a system by which you invest the same amount on a regular basis. This enables you to buy more when the price is low and less when the price is high. The advantage is that your average cost per unit may be less than the average unit price.
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How Dollar Cost Averaging Works |
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Investment Amount |
Share Price |
Shares Purchased |
|
January |
$250 |
$10 |
25 |
|
February |
$250 |
$11 |
22.7 |
|
March |
$250 |
$5 |
50 |
|
April |
$250 |
$12 |
20.8 |
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Total |
$1,000 |
$38 |
118.5 |
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Average price per share ($38/4) = $9.50 |
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Your cost per share ($1,000/118.5) = $8.44 | |
You can dollar cost average by making regular periodic contributions or make one contribution and use our systematic dollar cost averaging program. If you elect this free program, each month Ameritas will automatically transfer a predetermined amount or percentage from the money market or fixed account to the investment options you've selected.
Keep in mind, dollar cost averaging is most effective when you are able to continue investing equal dollar amounts at regular intervals through periods of both low and high price levels. While this will not assure a profit or protect against a loss, it's a proven technique for lowering the average cost per share over time.
Please note: At this time, dollar cost averaging is not available with the Morningstar Asset Allocation Investment Level Models.
Rev. 9/7/2005 |
