Investing a fixed amount at regular intervals rather than trying to select one perfect entry point.
How it works
The investor contributes the same currency amount on a fixed schedule. That buys more units when prices are lower and fewer when prices are higher, removing the need to choose a single entry date.
Example
Investing 200 each month buys 4 units at 50, 5 units at 40, and 3.33 units at 60.
Limitations
The method does not guarantee profit or protect against a falling market. Holding cash while waiting to invest can also carry an opportunity cost.
Evidence LedgerHow this insight was built
Human reviewedThesis being tested
This definition explains Dollar-Cost Averaging accurately, with its practical use and material limitations.
Key assumptions
- The named calculation or convention is stated where definitions vary.
- The example is illustrative and not a forecast or recommendation.
What could invalidate the view
- A different market, instrument, jurisdiction, or methodology may use the term differently.
- The cited authority may revise its guidance or terminology.
- Editorial ownership
- Market Master · reviewed
- Approval state
- Reviewed financial content
- Evidence currency
- Current evidence window
- Source coverage
- 2 documented sources
Sources used for this insight