Dollar-Cost Averaging
Investing a fixed amount at regular intervals regardless of price, to smooth out market timing.
What does dollar-cost averaging mean?
By buying steadily — more shares when prices are low, fewer when high — dollar-cost averaging removes the temptation to time the market and builds a disciplined habit. Most automatic retirement contributions work this way.
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Related terms
Dollar-Cost Averaging — frequently asked
Does dollar-cost averaging beat investing a lump sum?
Statistically, investing a lump sum immediately wins about two-thirds of the time, because markets rise more often than they fall. Dollar-cost averaging’s real value is behavioral — it removes timing anxiety and keeps you investing consistently.
How do I set up dollar-cost averaging?
Automate a fixed amount into the same investments on a set schedule — say every payday — regardless of price. Your 401(k) contributions already work this way, buying more shares when prices are low and fewer when high.