Zero Cost Averaging by Terrence M. Quinn and Kristin A. Quinn
This technique steps in to assist in the management of the investment after the investor has determined which securities to purchase and when to open the position.
Traditionally, fundamental analysis and technical analysis have been used to evaluate stocks, mutual funds and other equity securities. With technical analysis, the focus is upon the tradable instrumentís actual price movement in the marketplace, as opposed
to fundamental analysis, whereby the companyís earnings potential is examined and the trading instrumentís performance in the marketplace is not analyzed. Based on price patterns, technicians endeavor to determine when it is the best time to buy (or sell) the security.
There is a third form of security analysis, known as zero cost averaging (ZCA). ZCAís objective is to assist the investor in answering the question of how to invest in the stock, mutual fund or other security. Zero cost averaging does not replace either fundamental or technical analysis; rather, ZCA works with other analytical methods. Once the investor has determined what securities to purchase and when is a good time to open the position, ZCA steps in to assist in the management of the investment.