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Homework answers / question archive / Why do investment advisors promote dollar cost averaging when the costs of those trades will wipe out any benefit?

Why do investment advisors promote dollar cost averaging when the costs of those trades will wipe out any benefit?

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Why do investment advisors promote dollar cost averaging when the costs of those trades will wipe out any benefit?

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Investment advisors promote dollar-cost averaging because of many reasons.

  • It separates the emotional component from decision making. The investor can invest in a certain asset irrespective of the fluctuation of the price level.
  • It reduces the risk of a large amount of loss. It is beneficial to invest in a small amount as investing large amounts increases the risk. It eliminates the bad timing of investment.