Final answer:
Accumulation plans, such as investing in stocks, bonds, or mutual funds, offer benefits such as compounding returns and dollar cost averaging.
Step-by-step explanation:
Accumulation plans are financial strategies that allow individuals to systematically invest money over time, with the goal of accumulating wealth for the future. These plans offer various benefits, but two common benefits include:
- Compounding returns: Accumulation plans often involve investing in vehicles such as stocks, bonds, or mutual funds, which have the potential for compounding returns. This means that the earnings on the invested money are reinvested, leading to exponential growth over time.
- Dollar cost averaging: With accumulation plans, individuals invest a fixed amount of money at regular intervals, regardless of the market conditions. This strategy allows investors to buy more shares when prices are low and fewer shares when prices are high, potentially lowering the average cost per share over time.