Dollar-Cost Averaging

Dollar-cost averaging (DCA) is the practice of investing a fixed amount of money at regular intervals — regardless of whether markets are up or down.

How It Works

Instead of investing a lump sum all at once, you invest the same amount every month (or week, or quarter). When prices are high, your fixed amount buys fewer shares. When prices are low, it buys more.

Example

Investing $200 per month in a stock:

• Month 1: Price $20 → 10 shares
• Month 2: Price $25 → 8 shares
• Month 3: Price $16 → 12.5 shares
• Total: $600 invested, 30.5 shares, average cost ~$19.67/share

Why It Works

DCA removes the pressure of trying to time the market — picking the "perfect" moment to buy. Since nobody can consistently predict short-term market movements, steady investing over time tends to smooth out the highs and lows.

Important Note

DCA does not guarantee a profit or protect against loss in a declining market. It is a disciplined approach to building a position over time.