Dollar‑Cost Averaging
Last verified: 2026-07
Comparison
Market High5
Market Low8
Average Price6.5
DCA Advantage15
What Is Dollar‑Cost Averaging?
Dollar‑cost averaging (DCA) is a simple, disciplined strategy. You invest the same amount of money on a regular schedule – say $500 every month into an S&P 500 index fund – no matter if the market is up or down.
Why It Works
When prices are low, your fixed amount buys more shares. When prices are high, it buys fewer. Over time, this lowers your average cost per share and smooths out market volatility.
Example
| Month | Share Price | Shares Bought ($500) |
|---|---|---|
| Jan | $50 | 10 |
| Feb | $25 | 20 |
| Mar | $40 | 12.5 |
Average cost: $35.17 vs. $38.33 if you had bought all at once in January.
The Visual
The interactive chart shows how DCA lowers your average entry price compared to a lump‑sum investment during a down market.
Last verified: July 2026