Buying Common Stocks On The Monthly Investment Plan

by David Jenyns on July 17, 2009

This Monthly Investment Plan (MIP) was created by members of the New York Stock Exchange for those who wished to buy common stocks on an installment basis. The Monthly Investment Plan offers the modest investor many benefits.

Three months later, the price had gone up to $25; this time your $100 buys four shares. The average price in the two transactions was $22.50, but the average cost per share to you is only $22.22. Over a long period of time this difference between average price and average cost on a number of shares can amount to a good deal of green stuff, and as long as you ultimately sell at a price above your average cost, dollar averaging can make green stuff for you no matter how the price of your stock goes up or down.

You pay only the standard commission any other investor pays. Fractional shares of stock are always figured to the fourth decimal place.

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