Knowledge is power. We empower our clients.

Get Started Now
<< Back to Financial Glossary

What is Dollar-Cost Averaging?

Dollar-cost averaging is the process of investing a fixed amount of money on a regular basis. With dollar-cost averaging, you are repeatedly buying shares of an investment regardless of whether the price is up or down, thereby “averaging” the cost you pay overall. Dollar-cost averaging helps you stick to your long-term investment plan and removes the emotional roller coaster that can come with daily price moves.

Here’s how dollar-cost averaging works: You commit to investing $100 every month into a mutual fund. In the first month, the investment price is $10 per share, so you can buy 10 shares (disregarding any fees that may be associated with the purchase). During the second month, the shares are trading higher at $13, so you purchase only 7.7 shares. However, in the third month, the shares are $8, so you would receive 12.5 shares. And so on.

You may already be dollar-cost averaging. When you set up an automated investment plan through Jemma Financial Services or when you contribute to a 401(k) or other retirement account through your employer, the plan removes a set amount at a regular interval to invest throughout the year.

One potential downside to dollar-cost averaging: If you are investing on a regular basis outside of a retirement account, the transaction fees, if any, could be counterproductive. In this case, investing quarterly or bi-annually—not monthly—may be more financially beneficial.

Jemma Everyday Wisdom: Dollar-cost averaging can be a prudent strategy that takes emotion out of investing and eliminates the temptation to try to time your purchases.

Log In to Your Existing Account Get Started Now

Need assistance? Call 855.662.2121 or email info@jemmafinancial.com

You are now leaving Jemma Financial

Yes, I would like to leave No, I would like to stay

Important Notice

You are now leaving the Jemma Financial Services website and will be entering the Charles Schwab & Co., Inc. (“Schwab”) website.

Schwab is a registered broker-dealer, and is not affiliated with Jemma Financial Services or any advisor(s) whose name(s) appear(s) on this website. Jemma Financial Services is/are independently owned and operated. [Schwab neither endorses nor recommends {Name(s) of Investment Management Firm(s)}, unless you have been referred to us through the Schwab Advisor Network®. (This bracketed language is for use by Schwab Advisor Network members only.)] Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with “Name(s) of Firm(s)” under which Schwab provides Jemma Financial Services with services related to your account. Schwab does not review the Jemma Financial Services website(s), and makes no representation regarding information contained in the Jemma Financial Services website, which should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.

IMPORTANT NOTICE

You are now leaving the Jemma Investment Advisors, LLC Website and will be entering the Charles Schwab & Co., Inc. ("Schwab") Website. Schwab is a registered broker-dealer, and is not affiliated with Jemma Investment Advisors, LLC, or any advisor(s) whose name(s) appears on this Website. Jemma Investment Advisors, LLC is independently owned and operated. Schwab neither endorses nor recommends Jemma Investment Advisors, LLC. Regardless of any referral or recommendation, Schwab does not endorse or recommend the investment strategy of any advisor. Schwab has agreements with Jemma Investment Advisors, LLC under which Schwab provides Jemma Investment Advisors, LLC with services related to your account. Schwab does not review the Jemma Investment Advisors, LLC Website, and makes no representation regarding the content of the Website. The information contained in the Jemma Investment Advisors, LLC Website should not be considered to be either a recommendation by Schwab or a solicitation of any offer to purchase or sell any securities.

Continue to Schwab

This will close in 0 seconds