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One of the great conveniences of investing in mutual funds is that most fund companies make it easy to put your investment program on autopilot -- that is, to invest on a regular basis.

Investing regularly is a great habit to develop, not just for building wealth, but also for managing the ups and downs of the market. Investing a fixed amount in a particular fund at regular intervals is a strategy called dollar-cost averaging. Because the amount you invest is constant, you buy more shares when the price is low and fewer when the price is high. As a result, the average cost of your shares is typically lower than the average market price per share during the time you're investing.

You're already benefiting from dollar-cost averaging if you're participating in an employer-sponsored retirement plan that withholds money from your paychecks. This is a convenient, systematic way to build an investment portfolio. Because the amounts you invest remain constant, you can easily budget for them. Dollar-cost averaging cannot eliminate the risks of investing in financial markets. It doesn't ensure a profit or protect you against a loss in declining markets, nor will it prevent a loss if you stop dollar-cost averaging when the value of your account is less than your cost. You should also consider your willingness and ability to invest continually-even through periods of market decline-since the advantages of dollar-cost averaging depend on your making regular purchases through thick and thin.

No investment method can guarantee a profit if you sell at the bottom of the market. But if you're a patient investor who contributes a fixed amount of money in regular installments, you can greatly reduce a loss that would result if the market dropped sharply right after you'd made a large investment.