What Is Dollar-Cost Averaging?

Dollar-cost averaging, or DCA, means investing a fixed amount of money at regular intervals, such as every month. You invest the same amount whether prices are high or low.

When prices are high, your fixed amount buys fewer shares. When prices are low, it buys more. Over time, your average cost per share tends to land between the highs and lows, rather than at one unlucky moment.

DCA does not guarantee a better return. If prices rise steadily, a lump sum invested on day one may grow more. What DCA offers is a simpler, calmer process. It spreads your decisions over time, so you are not trying to guess the right day.

The biggest benefit for most beginners is consistency. An automatic schedule keeps investing even when headlines are frightening. Many people who try to time the market end up waiting on the sidelines, missing gains they wanted.

To use DCA, pick an amount you can afford every month, choose a fund, and set up an automatic transfer or purchase on a date after your paycheck arrives. Review the plan once or twice a year, and avoid stopping it just because prices have dropped.

The Decades game on this site lets you see how regular saving habits shape a long-term outcome. Every result there is hypothetical.