Online stock trading company – Momentarily ignoring the question of timing of stock purchases, let us suppose Mr.
A has $100 of new savings to invest on the first day of each month. With half of this he buys common stock, and the other half he treats as reserve, putting it into a savings deposit. From a cost viewpoint, his savings are always divided equally between stock and reserve. During the first year he deposits $600 in the savings bank and pays $600 for stock, buying 120 shares, an average of 10 shares a month, at an average price of $5 a share. (To simplify this illustration, we ignore the expense of buying and selling stock, also the income on investments.) Now let us look at Mr.
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