Dollar-Cost Averaging May Help Investors Take Advantage of Volatile Share Prices

Buy low, sell high – if only maximizing your investment returns was as easy as it sounds. Of course, the unpredictable nature of the financial markets makes timing them – attempting to buy at the bottom and sell at the top – nearly impossible, not to mention risky. This is especially difficult because stock market rallies tend to occur in spurts.

An investment strategy that might help is dollar-cost averaging – spreading out your investment at regular intervals. For example, let’s say you have $12,000 to invest. Instead of speculating on what day to invest the entire amount in a security that has price fluctuations due to market volatility, you could invest $1,000 per month over a 12-month time period. By regularly investing a fixed amount, you purchase more shares when the share price declines and fewer shares as the price increases. Over time, dollar-cost averaging may result in a lower average cost per share than investing a lump sum.

Consider Dollar-Cost Averaging as Part of Your Investment Strategy

Compare the difference in the average cost per share if you invested one lump sum of $12,000 in a fund or used a dollar-cost averaging strategy.

Lump Sum Investment – $12,000 Invested One Time

Month Amount Invested Cost Per Share Number of Shares Purchased
1 $12,000 $68 176.5

Total amount invested ($12,000)
÷ Total number of
shares purchased (176.5)

Average
cost per share
= $67.99

Dollar-Cost Averaging – $1,000 Invested Each Month Over 12 Months

Month Cost Per Share Number of Shares Purchased
1 $68 14.7
2 $70 14.3
3 $63 15.9
4 $57 17.5
5 $51 19.6
6 $52 19.2
7 $58 17.2
8 $55 18.2
9 $60 16.7
10 $68 14.7
11 $73 13.7
12 $71 14.1

Total amount invested ($12,000)
÷ Total number of
shares purchased (195.8)

Average
cost per share
= $61.29

This hypothetical example is for illustrative and educational purposes only and does not represent the performance of any particular investment. Fees and expenses that apply to continued investments are excluded.

Over time, sitting in a money market and being out of the market even briefly can significantly diminish your returns. Want to get back to being invested? Consider utilizing dollar-cost averaging as a strategy by establishing a systematic exchange.

For assistance, call a Janus Henderson Representative at 800.525.3713.

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