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Dollar cost averaging is the process of investing a fixed sum of money in the market at fixed intervals, usually monthly or bi-monthly, regardless of market conditions, valuation, or economic outlook. As a small individual investor saving for retirement, dollar cost averaging monthly into your retirement account is your best bet for retiring rich. It allows you to filter out the day-to-day noise that leads so many investors astray and stay the course due to it's automatic, mechanical nature.

Wait a minute, you might ask. How could ignoring market conditions possibly be a wise investment strategy? As it turns out, nobody can predict stock market returns in the short term, not even the pros. Dollar cost averaging allows you to buy more shares when prices are low and fewer shares when prices are high, increasing long-term returns. Dollar cost averaging is a vote of confidence in the American economy, a realization that though the journey may have its potholes, at the end of the day Americans will get up and go to work in the morning.

Dollar cost averaging can help increase your returns in less obvious ways, as well. An investor's biggest enemy is himself. All too often, otherwise prudent investors panic when stocks are down and sell out at the worst possible moment, locking in their losses but confident they will get back into the market when stocks begin to rise again. Unfortunately, things rarely work out this way in the real world. Acting on emotion rather than logic, most market timers end up missing out on the rebound due to the fear of suffering further losses. Dollar cost averaging instills discipline, which is the key to any investment plan's success. Dollar cost averagers invest month in and month out, regardless of what's happening with the economy. They never miss out on a rebound or bull market and while it's true they also suffer through the bad times, they can console themselves with the knowledge they are buying more shares at lower prices, which drives future returns ever higher and leads to a rich, fulfilling retirement at the end of the road.

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