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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Dollar Cost Averaging


This is a strategy for mutual fund investing. You invest a fixed dollar amount each month in the fund. The theory behind this is that if you buy when the price is declining, you will buy more shares each period, so that when the rebound happens, your overall investment will be worth more. Of course, it takes a big leap of faith to keep buying in the face of persistent declines. Your broker will tell you that "it's a GREAT investment" but if it's so great, why is it falling? Is it a good deal for you, or for the broker? You make the call.