One of the holy grails of investing is the ability to achieve a decent return without volatility. After all, I think we all learned somewhere along the line that the shortest distance between two points is a straight line. To say we are a long way from achieving that goal is certainly an understatement. But, until we do achieve that goal, dollar cost averaging can help.

Simply put, dollar cost averaging is investing at specific intervals over a specified period of time. Instead of buying at a single share price with a lump sum investment, dollar cost averaging buys when prices are both high and low, thus averaging the share price.

There is some argument that dollar cost averaging (DCA) can actually inhibit the return on investment, and I have no disagreement with that argument. If a purchase is made when the share price is low and the price soars in the future, the results will show better than when purchases are made at a higher average price. Secondly, short-term, dollar cost averaging often does not give the process enough time to show its true colors.

Thus, in order to truly benefit from dollar cost averaging, an investor needs to understand that it is a long-term process, and more a function of decreased volatility than of absolute return on investsment.

Looking at returns over a 1 year, 3 year, and 5 year period is helpful in determining investment research. We must remember, though, that these are only