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I've heard this strategy described somewhere and I want to learn more about its history, theory, practice, etc. The problem is that I don't know what it is called so I don't know what to Google.

The strategy is that you invest a specific amount, say $1000, into an asset, say gold, and whenever that asset changes price by a certain amount you adjust your investment back to $1000. It goes down 5%, you buy a little. It goes up 5% you sell a little. So you are always buying low and selling high. As long as the price is fluctuating or going up, you'll be making a profit.

What is this strategy called?

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    How does this work when a stock drifts from $100 down to $10 over a few years before going to $0? (Bankrupt) – JTP - Apologise to Monica Dec 3 '14 at 17:01
  • Yes, you would have to abandon it at some point, but the same can be said of most investment in a plummeting asset. That's why I need to learn more about it :) – msergeant Dec 3 '14 at 21:15
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Rebalancing would be the general idea of maintaining a specific mix when investing, as something you don't mention is how much cash do you have to invest as if what you invest in keeps dropping as Joe Taxpayer points out then you'd be buying and buying and possibly never selling and thus don't profit. For example, if you bought Detroit bonds a few years ago and then bought more as they went down then the city declared bankruptcy that could mean quite the loss for some people.

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This is a form of dollar cost averaging. Use that as a term on a search engine will reveal several other variations of this strategy.

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Sounds most similar to value averaging, which I learned about from this site just a few days ago.

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