Dollar-Cost Averaging (DCA)

Dollar-Cost Averaging (DCA) is an investment strategy where you invest a fixed dollar amount at regular intervals, regardless of the asset's price. This approach reduces the impact of volatility and removes emotion from investing.

How It Works:

• Invest same amount each period (weekly, monthly)
• Buy more shares when prices are low
• Buy fewer shares when prices are high
• Average cost per share tends to be lower than average price

Example: $500 monthly investment over 4 months:

Month	Price	Shares Bought
1	$50	10 shares
2	$40	12.5 shares
3	$25	20 shares
4	$50	10 shares
Total	Avg $41.25	52.5 shares

Average price: $41.25 | Your average cost: $38.10/share

Benefits:

• Removes market timing stress
• Automatic, disciplined investing
• Reduces impact of volatility
• Prevents emotional decisions
• Perfect for 401(k) contributions

DCA vs. Lump Sum: Studies show lump sum investing beats DCA ~66% of the time (because markets rise more often than fall). However, DCA provides peace of mind and is better than not investing at all.

Best For:

• Beginning investors
• Regular income (paycheck investing)
• Volatile markets
• Those who worry about timing