What is a constant dollar plan?

The constant dollar plan is a type of investment strategy that is used to maximize chances to return the investment by minimizing the degree of risk associated with the investment. The main focus of this type of strategy is to find ways to reduce volatility, which is currently associated with the possibility of investment. Ideally, a well -created constant dollar plan will work regardless of whether the market is moving up or down.

, which is sometimes referred to as the average cost of the dollar, the usual approach in the plan with a constant dollar is the purchase of securities in fixed amounts of the dollar. Purchases are in smaller land and occur for a certain period of time. Depending on the current price, the investor either buys fewer units or more units of security. Protection in this way helps the investor to make a specific investment, but in a way that the investor does not open as much risk as buying huge many units at once.

It is simple. During the period when prices for securities are undergoing a period of descent, the investor will increase the number of units purchased. When a period of rising prices enters the game, the investor decreases back to the number of units purchased and remains in this mode until the price per unit of the level turns off and starts to fall back to the dollar amount.

One of the keys to create a feasible plan of a constant dollar is to set realistic amounts with a fixed dollar. While each investor would like to get shares at the best possible prices, the fact is that not all stocks or mutual funds will allow this to be recurring. This means that if an investor is serious about getting security shares, he must analyze the history of stock performance and use this data to come up with a fixed dollar amount that represents a respectable extent of purchase. Exploring past history and use of information to determine the realistic amount of the dollar often inYets the perfect basis for a constant dollar plan, which allows you to gradually acquire shares, but without so many risks.