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dollar cost averaging
What does dollar cost averaging mean?
Dollar cost averaging (DCA) is investing a fixed sum at regular intervals no matter the price, so you buy more units when prices are low and fewer when high, smoothing the average cost. It reduces the risk of poor market timing.
"Instead of timing the market she just dollar cost averages a hundred quid in every Friday."
Origin
Descriptive finance term; the 'averaging' refers to the resulting average purchase price over time.
Frequently asked questions
What is dollar cost averaging?
It's investing a fixed sum at regular intervals regardless of price, so you buy more units when prices are low and fewer when high, smoothing your average cost.
Why do investors use DCA?
It reduces the risk of poor market timing and removes emotion, since you invest the same amount on a schedule rather than trying to pick the bottom.
What does DCA stand for?
Dollar cost averaging — 'averaging' refers to the average purchase price you end up with over time.
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