Investing term
What is Dollar-cost averaging?
Investing a fixed amount on a fixed schedule, regardless of market level.
Dollar-cost averaging is investing a fixed amount on a fixed schedule — say $300 every month — regardless of whether prices are high or low. Because the dollar amount is fixed, your money automatically buys more shares when prices are down and fewer when they're up, which smooths your average purchase price over time.
It removes the impossible task of timing the market and replaces it with a rule you can follow forever. Its biggest benefit is behavioural: a fixed schedule keeps you investing through the scary stretches, when a discretionary investor would freeze or pull back. It turns market dips — which feel like disasters — into the moments your fixed contribution works hardest.
Invest the same $300 every month and it automatically buys more shares in a dip and fewer at a peak — smoothing your cost and keeping you invested through the scary stretches.
For example
Putting $300 in every month means a market dip lets your $300 buy more shares — the plan quietly turns volatility into an advantage.
Learn it by doing
That's Dollar-cost averaging in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 2, Why Investing Matters (And When It Doesn't)).
Try the free lesson →Why it matters to you
Dollar-cost averaging matters most for its psychology: it makes investing automatic and unemotional, which is exactly what defeats the behaviour gap. By committing to buy on a schedule, you never have to decide whether 'now' is a good time — a decision people reliably get wrong. It's the default engine of a workplace retirement plan and the simplest way to build a large position from a modest income.
⚠ It isn't a magic loss-preventer
Dollar-cost averaging smooths your entry price and enforces discipline, but it doesn't guarantee a profit or protect against a falling market — a portfolio can still drop. There's also evidence that if you already have a lump sum, investing it all at once often beats spreading it out, because markets rise more often than they fall. Its real value is behavioural, not mathematical magic.