Dollar-Cost Averaging

Dollar-cost averaging means investing the same amount on a fixed schedule — weekly, monthly — regardless of price. You buy more units when prices are low and fewer when prices are high.

DCA removes the temptation to time the market. Most investors underperform because they buy after rallies and sell after drawdowns. A schedule short-circuits the emotional cycle.

In a steadily rising market with no pullbacks, a single lump-sum purchase outperforms DCA on paper. The trade-off is psychological: lump-sum maximises regret risk if you happen to buy a top.

Three knobs: frequency (monthly is common), amount (only what you can afford to leave alone for years), and asset (broad and liquid is safer than narrow and exotic). Automate it so you cannot opt out.

DCA does not guarantee returns or protect against permanent loss. If the asset goes to zero, averaging in only spreads the loss over time. The asset still has to be worth holding.