Dollar-cost averaging (DCA) is investing a fixed dollar amount at regular intervals — say, $500 every month — regardless of price. It's the default way most people invest through a paycheck, and it removes the temptation to time the market.
Dollar-Cost Averaging
Invest the same amount, on the same schedule, no matter the headlines.
No sign-upNo lender referralsNo spamNo data sharingNo credit check
Advertisement
How it works
When prices are high your fixed amount buys fewer shares; when prices are low it buys more. Over time this smooths out your average purchase price and takes emotion out of the decision.
The trade-off
Historically, investing a lump sum right away has often outperformed spreading it out, simply because markets rise more often than they fall. But DCA reduces regret and is the natural fit for investing money as you earn it. Both are reasonable; the best plan is the one you'll actually stick with.
Educational information only — not investment advice, and not a recommendation to buy any security. Expense ratios are approximate and can change; verify with the fund issuer. We are not a licensed financial advisor.
Frequently asked questions
Is dollar-cost averaging a good strategy?
For investing money as you earn it, it's a sensible, low-stress default. This is educational information, not personalized advice.
Lump sum or dollar-cost average?
If you already have a lump sum, investing it promptly has historically done better on average, but DCA reduces the risk of bad timing. It depends on your comfort level.
More investing guides
Best Low-Cost Index ETFs for Long-Term InvestorsThe Three-Fund PortfolioVTI vs VOOHow to Start InvestingIndex Funds vs ETFsRoth IRA vs 401(k)Target-Date FundsEmergency FundCompound Interest ExplainedHigh-Yield Savings AccountsAsset AllocationDividend InvestingHealth Savings Account (HSA)529 College Savings PlansBonds ExplainedThe 4% Rule (Safe Withdrawal Rate)Roth Conversions ExplainedI Bonds (Series I Savings Bonds)Net Worth: Your Financial Scorecard