Dollar-Cost Averaging (DCA)

An investment strategy of buying a fixed dollar amount of an asset at regular intervals regardless of price, reducing the impact of volatility.

Dollar-cost averaging (DCA) removes emotion from investing by automating purchases on a schedule. You buy more shares when prices are low and fewer when prices are high, lowering your average cost over time.

How DCA Works

Invest $500 monthly into an index fund regardless of market conditions. Over 12 months, you'll buy at various price points, smoothing out volatility compared to investing a lump sum.

DCA vs Lump Sum

  • Lump-sum investing outperforms DCA about 66% of the time (markets trend up)
  • DCA reduces regret risk and is psychologically easier
  • DCA is ideal if you earn income periodically (salary)
  • Best for volatile assets like crypto or growth stocks

FAQ

Is dollar-cost averaging a good strategy?

DCA is excellent for long-term investors who want to reduce timing risk. It's especially effective in volatile markets and for people investing from regular income.

Can I dollar-cost average into crypto?

Yes. Most exchanges like Coinbase offer recurring purchases. DCA is popular for Bitcoin and Ethereum, where volatility makes timing the market nearly impossible.