Dollar Cost Averaging
Invest a fixed amount on a schedule — automatic discipline that buys more shares when prices are low.
The Core PrinciplesBeginner 4 min read· Lesson 12 of 13 in Investing Fundamentals
Mechanics
Investing $500 every month buys more shares in down months and fewer in up months, mathematically ensuring your average cost is below the average price you observed. Its real power is behavioral: it removes the 'is now a good time?' paralysis that keeps money on the sidelines.
DCA vs lump sum
If you already have a lump sum, investing it immediately wins about two-thirds of the time historically (markets drift up), but DCA drastically cuts the regret of terrible timing. For money earned monthly, DCA isn't a choice — it's just investing your income promptly instead of hoarding it waiting for a dip.