Dollar-cost averaging means investing a fixed amount of money at regular intervals – weekly, biweekly, or monthly – regardless of whether the market is up or down at that moment.
This approach naturally buys more shares when prices are low and fewer shares when prices are high, which averages out the purchase price over time rather than betting on a single entry point.
It removes the pressure of trying to identify the ‘perfect’ time to invest, which is extremely difficult to do consistently, even for professional investors.
The trade-off is that in a market that trends steadily upward over a long period, investing a lump sum immediately can outperform spreading it out, since more money is in the market for longer.
For most people investing from regular income – a paycheck – dollar-cost averaging happens naturally and remains one of the more psychologically sustainable ways to invest consistently.