It's called dollar-cost averaging. Dollar-cost averaging doesn't attempt to beat market volatility, but to make the best of it by investing the same amount at regular intervals on an ongoing basis. In that way, the investor buys fewer shares when prices are high and more shares when prices are low. If you're like most people, you don't have a huge chunk of money to put in a fund all at once. Dollar-cost averaging allows you to invest a little at a time by setting aside a portion of your paycheck.
Employees elect to have a percentage of their pay deducted from their paycheck into a fund.
Vanguard Principal Patrick Burke, who is in charge of online financial advice at Vanguard, says dollar-cost averaging doesn't need to stop with retirement accounts. It can also help people save in taxable accounts. By setting up an automatic investment account, you're making saving a priority. The money goes into a fund, and you adjust your living expenses accordingly. Since it's automatic, you're not tempted to put off your investment plan.