Constant dollar plan

When institutions first started to invest in the stock market, one of the first types of plans they came up with was the constant ratio plan, often called rebalancing. Another type of plan is called a variable ratio plan, there are all types of ways of doing these plans. The simplest is called the "Constant Dollar Plan", this plan has been discussed in a lot of investing books. How it works is very simple. Say you have $ 10,000 dollars to invest, you invest half into stocks, and the other half into bonds or a money market fund. Say your shares cost $10.00, you invested $5,000.00, so you have 500 shares. Later after a market move you find your shares are valued at $3.00 a share, you have lost 70% of your portfolio. You now transfer money into the stock, to bring the value back to $5,000.00, you add $3,500 dollars. You now have 1,666 shares. A while later you see that the market has recovered and you shares are now valued at $10.00 a share. Your shares are now worth $16,660 you now sell until you only have $5,000 in the market. You now have $5,000 in the stock market and $13,160 in bonds. That is the Constant Dollar Plan in a nutshell.

[1]

  1. ^ Practical Formulas for Successful Investing by Lucile Tomlinson

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • constant-dollar plan — The US name for pound cost averaging, i. e. the investment of a specified sum of money at regular intervals in the acquisition of assets. It is sometimes called dollar cost averaging …   Big dictionary of business and management

  • constant-dollar plan — Method of purchasing securities by investing a fixed amount of money at set intervals. The investor buys more shares when the price is low and fewer shares when the price is high, thus reducing the average cost. Bloomberg Financial Dictionary …   Financial and business terms

  • constant dollar plan — Method of purchasing securities by investing a fixed amount of money at set intervals. The investor buys more shares when the price is low and fewer shares when the price is high, thus reducing the average cost. Bloomberg Financial Dictionary …   Financial and business terms

  • Dollar cost averaging — (DCA) is an investment strategy that may be used with any currency. It takes the form of investing equal monetary amounts regularly and periodically over specific time periods (such as $100 monthly) in a particular investment or portfolio. By… …   Wikipedia

  • dollar cost averaging — See: constant dollar plan * * * dollar cost averaging UK US noun [U] FINANCE ► in the US, the type of investment plan in which an investor invests a particular amount of money regularly, especially in a mutual fund, whether prices are going up or …   Financial and business terms

  • Dollar-Cost Averaging - DCA — The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. Also referred to as a… …   Investment dictionary

  • ИНВЕСТИРОВАНИЕ: СПОСОБЫ И СТРАТЕГИЯ — INVESTMENT METHODS AND STRATEGIESСамые различные теории существуют насчет того, как наиболее удачно выбирать ценные бумаги. Разница между ними заключается главным образом в том, насколько они отличают капиталовложения (инвестиции) от спекуляций.… …   Энциклопедия банковского дела и финансов

  • инвестиции по формуле — Метод инвестирования, основанный на предварительно установленной временной модели или модели распределения активов, которая устраняет необходимость эмоционального принятия решений. Один из видов таких инвестиций, называемый усреднением долларовой …   Финансово-инвестиционный толковый словарь

  • averaging — See: constant dollar plan. Bloomberg Financial Dictionary * * * averaging UK US /ˈævərɪdʒɪŋ/ noun [U] FINANCE ► the activity of investing the same amount of money regularly in different shares, bonds, etc.: »Averaging will reduce your exposure to …   Financial and business terms

  • ПЛАН КАПИТАЛОВЛОЖЕНИЙ ПУТЕМ РЕГУЛЯРНОГО ИНВЕСТИРОВАНИЯ ДОЛЛАРОВ — (constant dollar plan) Принятое в США название плана усреднения издержек в фунтах стерлингов (pound cost averaging), который подразумевает регулярное инвестирование фиксированной суммы денег в приобретение активов. Иногда этот план называется… …   Финансовый словарь


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.