IFIC Mutual Funds Licensing Practice Exam · Question
Which term best describes the process of regularly investing a fixed amount of money at regular intervals, regardless of market fluctuations?
Dollar-cost averaging involves investing a fixed sum of money at regular intervals, which leads to buying more units when prices are low and fewer units when pr
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Question: Which term best describes the process of regularly investing a fixed amount of money at regular intervals, regardless of market fluctuations?
Answer options:
- Market timing. ✅ Dollar-cost averaging.
- Strategic asset allocation.
- Portfolio rebalancing.
Correct answer: Dollar-cost averaging.
Explanation: Dollar-cost averaging involves investing a fixed sum of money at regular intervals, which leads to buying more units when prices are low and fewer units when prices are high, potentially reducing the average cost per unit over time. This strategy helps mitigate the risk of market timing.
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