Dollar Cost Averaging

Dollar cost averaging is a way to reduce the risk that you will make an investment into a volatile market such as the share market at a time when prices are unusually high. You then may experience a sharp drop in the value of your assets immediately or soon after the investment is made. 

Dollar cost averaging works like this: instead of investing all of your money on a single day, you divide your money into smaller portions, and invest one portion at a time. For example, if you have $120,000 to invest, you might divide that money into 12 portions of $10,000, and invest one portion on the first day of each month.

Dollar cost averaging is a kind of diversification. You diversify the time when you buy your investment, and therefore reduce the importance of any particular time when you might make an investment. 

The Dover Group