Investment Strategy: Dollar-Cost Averaging

Investing for the long haul

“Dollar-cost averaging” --- according to financial experts, it’s a sensible way to ride out the ups and downs of the financial markets and reduce financial risks.

When you open a savings account at a bank, you’re guaranteed a certain return on your investment. The return is determined by the interest rate.

When you invest in equities, you are not guaranteed a set return. (Equities are stocks and bonds, such as those offered through the Vermont Higher Education Investment Plan, or VHEIP, Managed Allocation Option and the 100% Equity Option.) Instead, the value of your account fluctuates as financial conditions change.

Historically, stocks and bonds offer better returns in the long run than savings accounts. At any time, however, you could lose money.

A way to minimize the possible losses is to invest an equal amount each month. That way, you buy more “shares” when prices are low, and fewer when they are high. The average cost of each share will likely be lower than if you jump in and out of the market by investing at what you think is the right time.

This doesn’t guarantee higher returns, or ensure that you won’t lose money, but it’s a prudent way of investing for a long-term goal, such as a college education for your child.

For more information on the Vermont Higher Education Investment Plan, call 800-637-5860 or visit www.vheip.org.