dollar-average: meaning, definition, pronunciation and examples
RareFormal / Financial Jargon
Quick answer
What does “dollar-average” mean?
A method of investing fixed amounts of money at regular intervals, regardless of the security's price, to reduce the impact of market volatility.
Audio
Pronunciation
Definition
Meaning and Definition
A method of investing fixed amounts of money at regular intervals, regardless of the security's price, to reduce the impact of market volatility.
A disciplined, long-term investment strategy designed to mitigate risk by purchasing more shares when prices are low and fewer shares when prices are high, thereby lowering the average cost per share over time.
Dialectal Variation
British vs American Usage
Differences
The term is of American origin. In British English, the equivalent concept is more likely to be referred to as 'pound-cost averaging' when discussing investments in sterling.
Connotations
In both varieties, the term connotes financial prudence, discipline, and a long-term, risk-averse approach to investing.
Frequency
The term is infrequent in general discourse but standard within financial contexts. The American variant 'dollar-cost averaging' is globally recognized in finance, even in the UK.
Grammar
How to Use “dollar-average” in a Sentence
[Investor] dollar-averages into [fund/stock][Strategy] involves dollar-averagingVocabulary
Collocations
Examples
Examples of “dollar-average” in a Sentence
verb
British English
- Many investors choose to dollar-average into the FTSE 100 tracker fund each month.
- She decided to dollar-average her pension contributions to mitigate risk.
American English
- He plans to dollar-average into the S&P 500 ETF with every paycheck.
- The advisor recommended dollar-averaging to avoid buying at a market peak.
Usage
Meaning in Context
Business
Standard term in personal finance, investment advising, and wealth management literature.
Academic
Used in economics and finance papers discussing retail investment behavior and portfolio theory.
Everyday
Very rare in casual conversation, except among financially literate individuals discussing their portfolios.
Technical
Core concept in investment strategy, automated brokerage services, and financial planning software.
Vocabulary
Synonyms of “dollar-average”
Strong
Neutral
Weak
Vocabulary
Antonyms of “dollar-average”
Watch out
Common Mistakes When Using “dollar-average”
- Using 'dollar-average' as a noun instead of 'dollar-cost averaging'. Confusing it with simply calculating an average price without the disciplined, periodic investment component.
FAQ
Frequently Asked Questions
Yes, 'dollar-average' is essentially a verb form derived from the more common noun phrase 'dollar-cost averaging'. They refer to the same investment strategy.
No, it does not guarantee a profit or protect against loss in a declining market. It is a risk-management strategy, not a performance guarantee.
It removes emotion and the pressure of 'timing the market' from investment decisions, promoting disciplined, long-term saving habits.
It is most effectively and commonly used with highly liquid investments like mutual funds or exchange-traded funds (ETFs), where you can buy fractional shares regularly without high transaction costs.
A method of investing fixed amounts of money at regular intervals, regardless of the security's price, to reduce the impact of market volatility.
Dollar-average is usually formal / financial jargon in register.
Dollar-average: in British English it is pronounced /ˈdɒlə ˈæv(ə)rɪdʒ/, and in American English it is pronounced /ˈdɑːlɚ ˈæv(ə)rɪdʒ/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “It takes the emotion out of investing.”
Learning
Memory Aids
Mnemonic
Think of DOLLAR-AVERAGING as DOLLAR + AVERAGE. You invest a fixed number of DOLLARS regularly to get a better AVERAGE price over time.
Conceptual Metaphor
INVESTING IS SMOOTHING A PATH (reducing peaks and valleys of price volatility).
Practice
Quiz
What is the primary goal of dollar-averaging?