Dollar Cost Averaging (DCA)
strategy · investing · risk management
Dollar cost averaging buys a fixed amount at regular intervals to reduce timing risk and smooth entry prices over time.
- Also known as
- Cost Averaging, Periodic Investing
Dollar cost averaging (DCA) is a rules-based approach that splits purchases into equal amounts over a schedule, such as weekly or monthly buys. It reduces dependence on choosing one perfect entry price.
DCA can reduce emotional decision-making and make volatile markets easier to approach. It does not guarantee profit or a lower average cost; in a steadily rising market, a lump-sum purchase would have performed better.
Fees, spreads, taxes, and custody choices matter. Very small recurring buys can be inefficient if exchange fees or withdrawal fees consume a large percentage of each purchase.