Dollar Value Averaging (DVA): You don't select how much you wish to invest per period, which is dollar cost averaging (DCA),instead you select the amount you want your account to be worth each and every period(month, quarter, semi-annual - but monthly or quarterly is prefered with this method).

In other words, you select a target value you want your account to grow each and every period and after making your selection you have to either add to the account or withdra from your account to adjust the value to match the target you have set.

Dollar value averaging is very easy to use. But to understand the benefits of DVA you need to understand 3 terms:

1. Account Value - The value of your account at any given time - usually being the present value of your account
   
2. Cumulative Investment - total money invested in equities up to the current point in time.
   
3. Instantaneous Return On Investment (ROI) - As your cumulative investment gets smaller and smaller, your return on investment gets larger and larger.  When cumulative investment goes to zero or less your RIO is infinite.

Unlike dollar cost averaging and asset allocation, dollar value averaging takes a bit more effort to do but it is well worth it.

Examples of DVA:

Assume you have $1,000 to invest right now and you want your account to grow by $100 per month.  Here is how you would apply dollar value averaging.

• Month 1 - $1,000
• Month 2 - $1,100
• Month 3 - $1,200
• Month 4 - $1,300
• Month 5 - $1,400
• Month 6 - $1,500

Okay, Now that we have set our first six months lets look at how we would apply this method of DVA when the market is going up and down.

Month 1 - We buy 1,000 shares of a mutual fund for $1,000 - so each share cost $1.00 ns our account is worth $1,000

Month 2 - Shares are worth $1.50 so that means that our account is now worth $1,500 but we wanted to grown at $100 per month. So, what do we do?  We sell $400 worth of shares and keep that money in our money market account.  Now our account is worth $1,100 and we are back on schedule and we have an extra $400 in our money market that we can use later need we have to add/buy shares.  We now have 733 shares

Month 3 - Shares are down to $0.95 so that means that our account is now worth $696 but we need our account to be worth $1,200 this month.  So, What do we do?  We need to add $504 to the account to make it come up to our target.  Now we buy $504 worth of shares and bring our account back up to it's target of $1,200.  We now own 1140 shares.

Month 4 - Shares are at $1.25 so that means our account is now worth $1425 and our accounts target this month is $1,300.  So we sell $125 worth of shares to get the account to its target.  We now own 1040 shares.

Month 5 - Shares are at $2.00 and our account is now worth $2080 and our target is $1,400 for this month.  So we need to sell $680 worth of shares to get to our target.  We now have 700 shares and we deposited $680 into our money market account.

Month 6 - Shares are at $2.10 and our account is now worth $1470 and our target is $1,500 so we buy $30 worth of shares to get us to our target for this month and we still have $650 extra in our money market account. We know have 714 shares

So after 6 months we own 714 shares of a mutual fund and our account is worth $1,500 but our cumulative investment is only $329!!  In other words, you own 714 shares that are worth a combined $1,500 but your total investment has been only $329 to date.

Now that's money in the bank!!

Remember you have to be adding money each and every month to your money market account as well.  With a Roth IRA you can invest a max of $5,000 per year which comes out to $416 per month or $96 per week.

• Dollar Value Averaging is the process of periodically depositing or withdrawing money so your account value grows linearly by a specific amount each period - monthly or quarterly
• DVA is a highly profitable buy low and sell high strategy
• DVA has the potential to return all the money you have invested,create a continually growing account value, and provide an increasing flow of income