Dollar-cost averaging (DCA)
Investing a fixed amount on a fixed schedule, whatever the price.
Dollar-cost averaging means you invest the same amount of money at regular intervals, such as $100 every month, no matter what the market is doing. It is the idea this whole site is built around.
How it works
Because the amount stays the same, you automatically buy more shares when prices are low and fewer when prices are high. Over time, your average cost per share ends up below the average price over the same period.
Most people already do this without the name: every paycheck contribution to a 401(k) is dollar-cost averaging.
Why people like it
It removes the hardest decision in investing, which is when to buy. You never have to guess whether today is a good day. You keep buying on schedule, including through crashes, which is when DCA does its best work.
Studies by Vanguard and others found that investing a lump sum all at once has beaten spreading it out about two-thirds of the time, because markets rise more often than they fall. But most people do not have a lump sum. They have a paycheck, and for them DCA is simply how investing happens.