What is a Constant Dollar Plan?
A constant dollar plan is a type of investment strategy that is utilized to maximize the chances of a return on an investment by minimizing the degree of risk associated with the investment. The main focus of this type of strategy is to find ways to reduce the rate of volatility currently associated with the investment option. Ideally, a well-crafted constant dollar plan will work regardless of whether the market moves up or down. Sometimes referred to as dollar cost averaging, the usual approach in a constant dollar plan is to purchase the securities in fixed dollar amounts. The purchases tend to be in smaller lots and occur over a period of time. Depending on the current price, the investor will either buy fewer units or more units of the security. Safeguarding in this manner helps the investor to pursue a particular investment, but in a manner that does not open the investor to as much risk as purchasing huge lots of units at one time. The general flow of a constant dollar plan is s
If you are trying to invest for the future but want to minimizing your risk while trying to maximize the chances of a return on an investment, then a constant dollar plan strategy could be an option for you. A constant dollar plan investment strategy is when securities (typically mutual funds) are bought at regular intervals and for fixed, pre-planned dollar amounts. Constant dollar plans generally move against the market demand. Meaning that when security prices rise, less is purchase and when security prices fall more securities are purchase. Constant dollar plan strategies are for investors who plan on keeping their securities for the long term – so it makes sense to buy the stocks when they are low and ride through the waves. The goal of a constant dollar plan is to reduce the risk of an investor. Instead of an investor choosing to buy huge quantities of a security at one given time, the purchasing is controlled not only by timed increments but the restriction placed upon the amoun
