Stock options trading – 1 This application of what has come to be known as dollar averaging (or dollar cost averaging) is striking evidence of the high prestige of this investment formula.

Although dollar averaging is usually thought of in connection with the small investor, a large number of institutions have long been practitioners” especially those such as pension funds, which deal with a constant flow of incoming cash. The New Mexico example is significant in that it involves a sum of money already on hand. A look at the special circumstances shows why the New Mexico Investment Council, responsir ble for investing the money, picked the dollar averaging approach. A majority of the eight council members were described as "amateurs" in investing and were undoubtedly reluctant to take the blame for making a quick, big plunge in the market at what might turn out to be the wrong moment”especially in view of the all-time high level of stock prices at the time. As it happened, the market did rise considerably for some time after the initial decision was made. It is therefore easy to say that the plan was wrong, since some stocks could have been bought at lower prices if a sizable portion of the money had been invested right at the start.

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