What is dollar cost averaging and how does it work?
It is an investment strategy for reducing risk or the volatility in the market. Since most members are paid once or twice a month you are automatically dollar cost averaging in the SMP plan. The amount of shares you can purchase for a fixed amount of money varies inversely with the price of those shares. In other words, if the share price of your selected investment declines, you will purchase a greater number of shares with each payroll. Conversely, if the share price of your selected investment rises, you will purchase a fewer number of shares.