How can you continue to build an investment portfolio when the market is up one day and down the next? With the recent swings in the market, many people don’t know if they should be buyers or sellers.

One of the most difficult aspects of investing is psychology; that is, being comfortable with your dollar decisions. Remember that most people who fail financially do so because they don’t have a plan.

The principles of Dollar Cost Averaging can help a nervous investor through the ups and downs of today’s uncertain market. Using this approach, you invest a fixed number of dollars at regular intervals into a selected stock or mutual fund.

This discipline helps to avoid two common investment errors:

• Investing all funds in the market when prices are high.

• Selling out at a big loss when prices fall dramatically.

Investing in this manner does not guarantee a profit in and of itself, but it does provide the opportunity to build substantial savings.

The great merit of the averaging system is that you buy relatively more shares when the market is down and fewer when it is high. Consequently, your average cost per share will be somewhat lower than the average price for the dates on which you purchased shares.

In dollar cost averaging, investments are made at regular intervals, regardless of market performance.

Here is what would have happened in the declining 1987 market to an initial investment of $1,000 in the XYZ Fund, a common stock investment security, followed by monthly investments of $100.

This example is based on the performance of an actual fund. The name has been changed to avoid endorsing a particular product.

Monthly Net Asset Shares Average Cost

Investment Value (NAV) Owned Per Share

December 1,000 13.95 71.685 13.95

January 100 15.34 78.203 14.07

February 100 15.79 84.537 14.20

March 100 16.22 90.702 14.33

April 27* 15.78 92.426 14.36

April 100 16.14 98.622 14.47

May 100 16.24 104.780 14.58

June 100 16.90 110.697 14.70

July 100 17.13 116.535 14.82

August 100 17.87 122.130 14.96

September 100 17.03 128.002 15.06

October 100 14.22 135.035 15.01

November 100 13.08 142.680 14.91

December 397** 11.24 177.969 14.81

December 100 11.11 186.970 14.03

Average Market Price per Share: 15.20 (Total NAV/Total No. Investments)

Number of Shares Purchased at Avg. Mkt. Price: 172.631 (Total Dollars Invested/Average Mkt. Price per Share)

Dollar Cost Avg. Price per Share: 14.03 (Total Dollars Invested/Total No. Shares)

Number of Shares Purchased at DCA Price: 186.970 (Total Dollars Invested/DCA Price per Share)

* Per share distribution of 30 cent income dividend.

** Per share distribution of 57 cent income dividend and 2.21 capital gains distribution.