One of the great conveniences of investing in mutual funds is that most fund companies make it easy to put your investment program on autopilot—that is, to invest on a regular basis. Investing regularly is a great habit to develop, not just for helping to build wealth, but also for managing the ups and downs of the market.

Investing a fixed amount in a particular fund at regular intervals is a strategy called dollar-cost averaging. Because the amount you invest is constant, you buy more shares when the price is low and fewer when the price is high. As a result, the average cost of your shares is typically lower than the average market price per share during the time you're investing.

You’re already benefiting from dollar-cost averaging if you’re participating in an employer-sponsored retirement plan that withholds money from your paychecks. This is a convenient, systematic way to build an investment portfolio. Because the amounts you invest remain constant, you can easily budget for them.

Dollar-cost averaging cannot eliminate the risks of investing in financial markets. It doesn't ensure a profit or protect you against a loss in declining markets, nor will it prevent a loss if you stop dollar-cost averaging when the value of your account is less than your cost. You should also consider your willingness and ability to invest continually—even through periods of market decline—since the advantages of dollar-cost averaging depend on your making regular purchases through thick and thin.

No investment method can guarantee a profit if you sell at the bottom of the market. But if you’re a patient investor who contributes a fixed amount of money in regular installments, you can greatly reduce a loss that would result if the market dropped sharply right after you’d made a large investment.