Systematic Investing

Contribute at regular intervals

Procrastination is human nature. But waiting to start investing can be costly. Starting early is an important element for successful investing. Another key element is investing at regular intervals. Investing the same amount at regular intervals (e.g., every month) is known as systematic investing or dollar-cost averaging.

Why consider systematic investing?

With this approach, you buy more shares when prices are low and fewer shares when prices are high. As a result, you may lower your average cost per share over time. For example, making a one-time investment puts much more weight on the specific market conditions at that one point — such as a share price of an equity or mutual fund. Spreading out your investments over regular intervals puts time on your side.

Systematic investing in action

Consider the following example. Let's say you invest $100 each month in the hypothetical Global OmniCorp:

In May, Global OmniCorp's share price is $10 a share, so your systematic investment that month buys you 10 shares $100/$10 a share = 10 shares
In June, the share price drops to $5 a share, so your investment that month gets you 20 shares. $100/$5 per share = 20 share

Systematic investing balances the different costs for the shares you purchased. If you had invested all $200 in May, you would only have 20 shares now, instead of 30. Of course, if you had invested all $200 in June, you would have 40 shares.

Although dollar cost averaging does not assure a profit or protect against risk, it is a logical, smart approach that can help you even out the fluctuations of the market.

Learn more

Explore other Investing Essentials topics through the menu to the left. Access extensive reference materials through the Literature Library. Or contact a financial advisor for advice on the right investment strategy for your specific goals.

Have a financial advisor contact me.

Why do I need a financial advisor?

A regular investment program neither provides assurance of making a profit nor guarantees against loss in a declining market. You should consider your ability to make regular investments through periods of fluctuating price levels before choosing any regular investment plan.

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