Dollar-cost averaging is the investment of an equal amount of money or a percentage of your salary in a group of investments at regular intervals. When prices are lower, your money buys more shares of the investment. When prices are higher, your money buys fewer shares.

While dollar-cost averaging will not assure a profit and does not protect you against loss in a declining market, it will typically reduce the average cost per share over time. Since the plan involves continuous investment in securities regardless of fluctuating price levels of such securities, you should consider your financial ability to continue your purchases through periods of low price levels before deciding to invest this way. A retirement plan is a great way to take advantage of dollar-cost averaging because it allows you to automatically contribute a certain dollar amount on a regular basis, regardless of the performance of your investments.