Kostnaðaröfnun

Kostnaðaröfnun, often translated as cost equalization or cost averaging, is a financial strategy. It involves investing a fixed amount of money at regular intervals, regardless of the asset's price. This means that when the price is high, you buy fewer shares, and when the price is low, you buy more shares. The goal is to reduce the average cost per share over time.

This strategy is commonly employed in long-term investment plans, such as retirement accounts or mutual fund investments. By spreading out purchases over time, investors can mitigate the risk associated with timing the market. Instead of trying to predict the best moment to buy, kostnaðaröfnun adopts a systematic approach. This can lead to a lower overall purchase price compared to investing a lump sum at a potentially unfavorable time.

The effectiveness of kostnaðaröfnun is most pronounced in volatile markets. In such conditions, the price fluctuations can lead to a more significant benefit from buying more shares at lower prices. However, in a consistently rising market, a lump sum investment made at the beginning might yield better returns. The strategy aims to smooth out the impact of market volatility and is a popular choice for investors seeking a disciplined and less emotionally driven approach to investing.