What is Dollar Cost Averaging (DCA)?

DCA is an investment strategy where you invest a fixed amount of money at regular intervals (e.g., $200/month)
into a financial asset, regardless of market conditions.

Why DCA Works Well (Especially for Long-Term Investors)

• Reduces timing risk: Avoid investing a lump sum before a market drop.
• Averages your cost over time: Buy more shares when prices are low, fewer when high.
• Emotion-free investing: Helps maintain discipline and avoid emotional decisions.
• Simple & accessible: Perfect for beginners investing regularly, like from a paycheck.

Why DCA Might Not Be Ideal for Everyone

• Shorter investment horizons: Less time to recover from downturns near retirement age.
• Large lump sum available: In rising markets, lump-sum investing might outperform DCA.
• Advanced investors: May prefer market timing or tactical strategies.

Simple Example

You invest $100 per month into a global stock ETF. Over 10 years, he invests $12,000 in total.
Thanks to DCA, his average share cost is reduced by buying more during market dips.

Summary