Dollar cost averaging

With dollar cost averaging, you use the same amount of money each period (usually monthly or weekly) to buy units in a fund, whether prices are moving up or down. When unit prices are low, you can buy more units. When prices are high, your money buys fewer units. Over the long run, it averages out. Remember, dollar cost averaging doesn't guarantee a profit, but can smooth out the market's ups and downs (volatility) and may help reduce the risk of loss.

See the benefits of dollar cost averaging

In this example, a couple Mark and Louise purchase $3,000 shares (units) each in the BT Imputation Fund. This compares the returns of Mark who invests $3,000 as a lump sum at the start of the year and Louise, who spreads her payments of $3,000 over 12 months or $250 per month.

Louise, who saves regularly throughout the year, finishes the period with an investment that is worth more than that of Mark the lump-sum investor – even though the starting price, finishing price and average price are exactly the same. It sounds unlikely, but it’s true. Check the figures for yourself!

	Louise Dollar cost averaging	Mark Lump sum investment
Average price / share	$9.25	$10
Shares accumulated	332.94	300
Current value (Dec)	$3, 329.37	$3000