Constant dollar plan

 

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Constant dollar plan

Method of purchasing securities by investing a fixed amount of money at set intervals. The investor buys more shares when the price is low and fewer shares when the price is high, thus reducing the overall cost.

Constant dollar plan

A plan which enables investors to accumulate shares in a mutual fund by purchasing them on a regular basis (for example monthly) with a fixed dollar amount. The dollar amount buys more shares when the price is low than when it is high, and over time the investor will have accumulated shares at a cost which is neither high nor low, but average for the period in question. Hence the other name for this process - 'dollar cost averaging'. In the UK, the same principles apply to savings plans for unit trusts, and the process is called 'pound cost averaging'.



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