You are a committed investor in a mutual fund. You take $250 in savings every quarter and invest that dough into a mutual fund of your choice, "no matter what." Some periods, the fund has done poorly and your $250 buys you more shares in it; other times, it trades at a high Net Asset Value and your dough buys you fewer shares. But you keep putting in money month after month, knowing that, over time, the market (and your fund) should go up.
You are constant-dollar-averaging your average purchase price per share of that fund.
A constant dollar plan is a way of investing in mutual funds where you add a constant sum of cash each month (or each quarter) to buy more shares of the fund.
Related or Semi-related Video
Finance: What are Weighted Averages and ...13 Views
Up Next
What is a Constant Dollar Plan? Also known as dollar cost averaging, it is an investment strategy where a fixed amount is invested on a regular sch...
What is Average Down, or Dollar Cost Averaging? Average down just means that an investor has bought more shares of a stock at a lower price than wh...