What Is Dollar-Cost-Averaging: Is It the Best Way to Invest?

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What is Dollar-Cost-Averaging?

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Using the DCA Approach

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Benefits of Dollar-Cost-Averages

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Investor Discipline

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The disadvantages of DCA is lack of glamour may bore some investors who prefer actively trading stocks for shorter timeframes.

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Lower risks tend to generate lower returns. Therefore DCA investors may forfeit higher returns associated with the riskier lump sum investment strategy.

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An alternative to DCA is lump sum investing. This is when you invest a lump sum immediately, unlike DCA, which invests equal amounts at intervals.

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What Is Dollar-Cost-Averaging: Is It the Best Way to Invest?

What is Dollar-Cost-Averaging?

Dollar-cost-averaging (DCA) is a systematic program of investing equal sums of money at regular intervals regardless of the investment’s price.

Using the DCA Approach

This strategy provides a disciplined approach, taking the guesswork out of investment timing and avoiding the outside events.