Dollar Cost Averaging (DCA) — Invest Without Timing the Market
Dollar cost averaging means investing a fixed amount at regular intervals, regardless of market conditions. You invest $500 every month whether the market is up or down.
How It Works
When prices are high, your $500 buys fewer shares. When prices drop, your $500 buys more shares. Over time, your average cost per share is lower than the average market price.
DCA Example
| Month | Price | $500 Buys |
|---|---|---|
| Jan | $50 | 10 shares |
| Feb | $40 | 12.5 shares |
| Mar | $45 | 11.1 shares |
| Apr | $55 | 9.1 shares |
Total: $2,000 invested, 42.7 shares. Average cost: $46.84 vs average price $47.50. DCA saved you money automatically.
SIP (Systematic Investment Plan) is the Indian version of DCA. Same concept, same benefits.