What Is Dollar-Cost Averaging?
Investing a fixed amount on a regular schedule regardless of price, so you buy more when prices are low and less when they are high.
Instead of trying to time the market — dropping a lump sum at the "perfect" moment — you invest the same amount every week or month, automatically. Over time your average purchase price smooths out, and you stop agonising over whether today is a good day to buy.
The real benefit is behavioural. A fixed, automatic schedule removes the emotion that makes people buy at peaks and panic-sell at lows. It is the same principle as paying yourself first, pointed at investing.
Investing $100 on the first of every month means that when the market dips, your $100 buys more shares — and when it spikes, it buys fewer. You never have to guess the timing.
Key points
- Removes the need to time the market.
- Turns investing into an automatic habit.
- Works best over long periods with steady contributions.
Put it to use
Learning the basics? Follow the whole path from saving to investing.