Dollar Cost Averaging and ETFs
Tuesday, November 17th, 2009
Tom Lydon (ETF Trends) submits:
Many experts have spoken on the benefits of dollar cost averaging, also known as DCA. But what is it, and can you do it with your exchange traded funds (ETFs)?
Carlos Sera of Financial Tales defines dollar cost averaging as when one commits to invest a certain dollar amount or percentage of salary to an investment program, usually in a mutual fund or exchange traded fund (ETF), over a consistent period of time. A good example is a traditional 401(k) plan to which an employee allocates 5% of a monthly paycheck. Sera has several tables illustrating how DCA works. (More on retirement).
