Dollar Cost Averaging (DCA) is a strategy where you invest a fixed amount at regular intervals, regardless of price. When prices are low you buy more units; when prices are high you buy fewer — automatically lowering your average cost basis over time.
Your blended entry price across all purchases. DCA typically produces a lower average than a single entry at any random point in a trending market.
In a steadily rising market, lump sum investing outperforms DCA. But in volatile markets, DCA reduces the risk of buying at peak prices.
By committing to a fixed schedule, DCA prevents you from trying to "time the market" — one of the most common costly mistakes investors make.
Stocks, ETFs, crypto, index funds — DCA is asset-agnostic. It's the preferred strategy for long-term wealth building with regular income.
| Year | Total Invested | Units Owned | Avg Cost Basis | Asset Price | Portfolio Value | Gain / Loss |
|---|
Suppose you invest $200/month into an ETF priced at $100. In month 1 you buy 2 units. If the price drops to $80 in month 2, you buy 2.5 units. If it rises to $120 in month 3, you buy 1.67 units. Your average cost = $600 ÷ 6.17 units = $97.25 — lower than any single price you paid.