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Dollar cost averaging
Whether you’re ready to take that first step toward reaching for your long-term investment goals or have already started your journey, you may be concerned about the possibility of market volatility or high stock prices. If so, dollar cost averaging might be for you.
Dollar cost averaging is a method of investing
a fixed dollar amount in securities at set intervals, regardless of market prices.
This lets investors buy fewer shares when prices are higher, and more shares
when prices are lower. This generally results in a lower average cost per share
than if the investor had purchased a constant number of shares at the same periodic
intervals.
The example below shows that although the average price per share was $12.25,
the investor's average cost per share was only $11.90 ($1200 investment / 100.8
shares purchased).
How dollar cost averaging works*
| |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
Totals |
| Amount
Invested |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$100 |
$1,200 |
| Share Price |
$14 |
$13 |
$13 |
$14 |
$14 |
$10 |
$13 |
$9 |
$14 |
$9 |
$10 |
$14 |
$12.25
average |
| Shares
Purchased |
7.1 |
7.7 |
7.7 |
7.1 |
7.1 |
10 |
7.7 |
11.1 |
7.1 |
11.1 |
10 |
7.1 |
100.8 |
| Average cost per share |
|
$11.90 |
*This example is for illustrative purposes only and is not intended
to represent an actual investment in any Natixis fund.
Dollar cost averaging could make sense for you, if...
- You are unsure about when to invest.
- You don’t want to commit too much at one time.
- A disciplined approach to long-term investing appeals to you. Good habits are hard to break.
- You want to use potential market volatility to your advantage.
- You’ve considered your ability to invest throughout all market conditions, and understand that there is no guarantee of success.
Monthly investing can add up
The chart below compares various monthly investment amounts and how they can add up over the course of 25 years.
These figures are for illustrative purposes only and are based on a hypothetical
8% annual rate of return. They are not meant to represent the performance of
any Natixis fund. This illustration does not show the effect of taxes on
your investment. Investment Builder is a systematic investment program that
does not guarantee a profit or protect against a loss in declining markets.
Please keep in mind continuous investing will take place in periods of high
and low prices. Always consider your ability to continue investing. Share price
and return will vary and you will have a gain or loss when you sell shares.
For ease of investing, make it automatic
Regular investing is even more convenient with an Natixis Funds Investment Builder
Program. This automatic investment plan allows you to buy shares regularly in
any Natixis fund. To start, select Investment Builder on your account application
and follow the easy instructions.
What you should know about dollar cost averaging
Periodic investment plans do not assure a profit or protect against a loss in declining markets.
Such plans involve continuous investment in securities regardless of fluctuating
price levels. Investors should consider their financial ability to continue
purchases through periods of low price levels.
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