Cost Averaging encourages what approach to investment?

Cost averaging encourages the approach of investing smaller amounts regularly over time. This strategy allows investors to spread out their investments over a period rather than committing a large sum at once. By doing so, investors can take advantage of market fluctuations; when prices are lower, they buy more shares, and when prices are higher, they buy fewer shares. Over time, this can lead to a lower average cost per share, thereby mitigating the impact of market volatility and reducing the risk associated with market timing.

This investment strategy is particularly beneficial for those who are apprehensive about investing in a fluctuating market or for those looking to build their portfolio gradually. It fosters discipline and can help instill a habit of consistent investing, allowing investors to stay invested during market cycles rather than trying to predict the best moments to invest. Overall, cost averaging aims to make investing more accessible and less risky for individuals, especially in markets that can be unpredictable.