Rebalance regularly. To take advantage of down-market values, rebalance your portfolio's asset allocation regularly by buying more shares of underweighted assets. For example, if you start the year with a 50-50 stock/bond allocation and stocks underperform during the year, buying more stocks to restore your intended mix may help you buy at lower prices rather than when everything's looking rosier -- and more expensive.

Dollar cost average. Another way to take advantage of market dips is by using an investment method called dollar-cost averaging. The strategy works over the long term because it relies on regular, fixed investments to buy more shares when prices are lower, thus reducing an account's average price per share.

To dollar-cost average, you simply investment the same amount in a mutual fund or other investment at regular intervals. As the price of the investment fluctuates over time, you buy more shares when they're cheaper and fewer when they are more expensive.

Dollar-cost averaging not only lowers your average cost per share, it also lets you avoid the worry about timing your investments and eliminates the possibility of investing all of your money at an inopportune time.

There are several easy ways to put dollar-cost averaging to work for you.

Investing automatically. Automatic investment programs offered with mutual funds let you transfer a set amount regularly from your checking or money market account into fund shares. You simply choose a fund, fill out an authorization form and it's done.

Reinvesting dividends. Having your mutual fund or stock dividends automatically reinvest into additional shares is another way to dollar-cost average. But because dividend amounts may not be exactly the same each period, the results may differ from fixed-investment methods.

Contributing to a 401(k). Your 401(k) or other employer retirement plan lets you contribute a set amount from each paycheck and invest it in your choice of the plan's investment. With many plans, you not only benefit from dollar-cost averaging but also receive tax-deferred growth plus a possible employer match.

Doing it yourself. You don't need a special program or account to start dollar-cost averaging. You can work with a financial advisor to set up a schedule of fixed investments that you can make monthly, quarterly or at whatever interval you like.

Regardless of which dollar-cost averaging method you choose, remember that the strategy does not assure a profit or protect you against a loss in declining markets. And because the benefits are realized over time, you should be prepared to continue it during periods of low and high prices.

The value of planning. Both portfolio rebalancing and dollar-cost averaging are best done as part of a long-term investment plan. If you don't have a clear investment strategy, consider working with a knowledgeable financial advisor to define your goals and how you intend to achieve them. Then you'll be in a better position to see the bright side of
volatile markets when they occur.

Add Your thoughts on the Message Board.