Dollar-Cost Averaging
Dollar-cost averaging means investing a fixed amount at regular intervals regardless of price, rather than committing everything at a single moment.
Because the amount is fixed, it automatically buys more units when prices are low and fewer when prices are high. Over time this produces an average entry price that is less dependent on the luck of any single purchase date.
Its real value is behavioural. Removing the decision of when to buy removes the temptation to wait for a better price, which in practice often means never buying at all, or buying only after a rally when confidence returns and prices are highest.
It is not free of trade-offs. In markets that rise over the long run, investing a lump sum immediately has historically produced higher expected returns than spreading it out, simply because the money spends longer invested. Dollar-cost averaging trades some expected return for a narrower range of outcomes.
The strategy reduces timing risk. It does not reduce market risk: a portfolio built through regular contributions can still be worth less than the sum invested if markets fall and stay down. It is a method of entry, not a guarantee.
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