Dollar-Cost Averaging

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What is Dollar-Cost Averaging?

Dollar-cost averaging (DCA) is an investment strategy where you invest regular amounts of money over a regular period of time (e.g. every month, every quarter, etc.). For example, investing $100 per month in the stock market would be dollar-cost averaging. Also, if you had $1,000 to invest, if you were dollar-cost averaging, you might invest $100 per month for 10 months. Dollar-cost averaging reduces the impact of volatility on the overall purchase, as well as protects against market volatility because you would be theoretically investing regular amounts over a regular interval of time – meaning you would continue to buy as the market went up, and went and down. This strategy removes much of the detailed work of attempting to time the market in order to make purchases of stocks at the “best” prices.