With this strategy, you invest the same dollar amount regularly in the same security, such as stocks or mutual funds. Over time, you have the opportunity to lower your investment costs and increase your long-term returns because you automatically buy more shares when prices are down and fewer shares when prices are high. With dollar cost averaging, your average cost per share over time may be lower than the long-term average share price. Reinvesting dividends from your investments can also increase your investment returns. Over time, your dividends are reinvested in new shares of your investment, creating a larger base on which you earn further dividends and possible capital appreciation when you finally sell your shares.
Most financial institutions offer low or no-cost automatic dividend reinvestment programs.
To put the lower capital gains tax rates to use in your portfolio, you'll have to work closely with your tax advisor. Your Financial Advisor can help you implement long-term investing strategies that may allow you to take advantage of these new rates either now or in the future. Rosemary Berkery is Senior Vice President and Director of the Merrill Lynch Private Client Marketing Group. The information in this Internet site is directed at, and is intended for distribution to, and use by, persons in the U.S. only. It is not intended for distribution to, or use by, any person in any other jurisdiction.