Is dollar-cost averaging a good investment strategy?

The investment strategy of dollar-cost averaging can be used by any investor who wants to take advantage of its benefits, which include a potentially lower average cost, automatic investing over regular intervals of time, and a method that relieves them of the stress of having to make purchase decisions under pressure when the market is volatile.

What is dollar cost averaging?

Dollar cost averaging can lower the average amount you spend on investments. It reinforces the practice of investing regularly to build wealth over time. It's automatic and can take concerns about when to invest out of your hands. It removes the pitfalls of market timing, such as buying only when prices have already risen.

How much money should you invest a month?

Suppose you have $5,000 to invest and have identified a stock you would like to purchase. However, you are unsure when and at what price you would like to buy the stock. Using a dollar-cost averaging approach, you might decide to invest $1,000 a month for 5 consecutive months.

What is pound cost averaging?

In the UK, it is referred to as pound cost averaging. DCA is a strategy in which instead of making one lump-sum purchase of a financial instrument, the investment is divided into smaller sums that are invested separately at regular predetermined intervals until the full amount of capital is exhausted.