By: Michael E. Martinez

Dollar cost averaging is a technique in which you reduce your risk by not buying a particular stock all at once. Shares may be purchased in an amount on a certain basis such as weekly or monthly, in some cases even yearly at times. If the stock is lower or higher since last time you bought it, regardless, at it current share price.

This strategy is not for those stocks that you're looking to make quick cash on. Use this strategy for companies such as Altria or General Electric that you might want to hold on to for five to ten years or more. For mutual funds, this may also be a good strategy. As long as you're using these investments for long term, this may be the best method out there to use.

You must decide how much money to invest on a systematic basis. Make sure you can maintain the current payments or this will defeat the purpose of this strategy. In theory, this will also reduce the overall cost of the investment. I use this method in my Roth IRA as my main holdings are mutual funds and I'm obviously going to hold my current holdings for quite some times. But I will rotate my holdings as need be.