“Dollar Cost Averaging” is a method of investing equal amounts of money regularly and periodically over specific time periods (such as $2000 monthly for 10 months) in a particular investment(s) or buying more shares of the same stocks when they decline in price.  By doing so, more shares are purchased when prices are low and fewer shares are purchased when prices are high.

 The benefit is to lower the average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time. 

While we have huge volatility for the mining stocks, this is a strategy that few consider. Yet, it can reward investors enormously.  After doing the essential analysis and buying a stock, the investor will take advantage of declines as well by buying at lower prices.  A decline is often not a time to complain but to take advantage of the “sale on a particular stock.” Yes, the investor is in a sense “doubling down.”

Fund managers regularly do it as regular cash inflows by investors are usually invested in their same universe of stocks. It is not that they want the shares to decline in price but that by buying while the stocks are down; it offers them to opportunity to enhance portfolio performance rather than wait for the return up in price.

For example, let’s suppose that an investor does the required analysis and buys 5000 shares of XYZ mines at .60 cents at a cost of $3000. Perhaps it has declined from $1.50 a share and .60 cents seems to be a much undervalued situation, so the investor buys it.Then the investor sits and waits and sees it decline to perhaps .15 cents a share. He or she then says “my gosh, what have I done?” The investor did nothing wrong at all, rather the investor may have a great opportunity to accumulate shares on weakness. 

At the same time, XYZ mines may have a good cash position, good exploration results and current buying of the company’s shares by the management. Those ingredients can point to a “sale” that one might take advantage of. Naturally, a recent analysis of the company is needed as well.

So the investor invests in $3000 worth of the XYZ shares and gets another 20,000 shares. The average cost for all the shares purchased drops to .24 cents. Any return up in price would be quite rewarding.

Now you may ask as to “how many investors do it?” One study showed less than 5% do it which is no surprise! Professional investors do it regularly and do not discuss it publicly either; they do not want company buying with them.

                                     The old investor poem goes like this:

“When prices are high, they run to buy, when prices are low, they let them go.” Believe me, that will never change.