What Is Dollar-Cost Averaging (and Why It Works)?

Feb 9

Intro

Worried about investing at the “wrong time”? That’s where dollar-cost averaging (DCA) comes in. It’s a strategy where you invest the same amount of money on a regular schedule, no matter what the market is doing.

Here’s why it’s a beginner-friendly way to reduce stress and build wealth over time.

💵 How Dollar-Cost Averaging Works

You pick a fixed amount (say, $200/month).
You invest it automatically, every month.
When the market is down, you buy more shares; when it’s up, you buy fewer.

👉 I like DCA because it removes the pressure of “timing the market.” Most people guess wrong anyway — consistency wins.

📊 Example

If you invest $200 every month:

January: Stock price = $50 → you buy 4 shares.
February: Stock price = $40 → you buy 5 shares.
March: Stock price = $25 → you buy 8 shares.

Over time, your average cost per share evens out, and you avoid buying everything at the peak.

✅ Why It Works

Removes emotions from investing.
Builds consistency and habit.
Works well for long-term goals like retirement.

Final Thoughts

Dollar-cost averaging is proof that slow and steady really does win the race.

👉 I always encourage new investors to automate monthly contributions. It’s simple, stress-free, and incredibly effective.

Vinh Tran