Dollar Cost Averaging
Dollar cost averaging is a strategy where you invest a fixed amount on a regular basis. Integrating this type of discipline into your investment approach ensures continuous investing regardless of market performance.
Why it Makes Sense
There are two key advantages to regular investing.
First, it allows you to invest smaller amounts of money
on an ongoing basis, which is typically easier on your
budget. Second, it gets your money working for you right
away to maximize your opportunity for returns. And with
dollar cost averaging, you don't need to worry about the
right time to buy because you're always investing.
Investing your savings frequently allows more time
for your money to grow. The below illustration shows
how an investment of $100 per month would grow over 5,
10, 15 and 20 years, assuming a consistent monthly
return of 7% annually.
The effectiveness of regular investing
$100 invested monthly with 7% compound annual return
How it Works
Instead of trying to accumulate one big lump sum and parting with it on a yearly basis, you can budget for smaller amounts. With tools like our Monthly Purchase Plan Calculator, you can determine the appropriate monthly amount needed to achieve your long-term objectives. You also have control over the investment frequency with the choice of weekly, bi-weekly, semi-monthly, monthly or quarterly contributions, depending on your individual needs and goals.
To learn more about individual RBC Funds and how they can address your investment objectives, access our Fund Updates. If you are ready to invest now, contact your advisor or explore the options available to invest with RBC Financial Group.
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