dollar-cost averaging(redirected from DCA)
Also found in: Medical, Acronyms, Encyclopedia, Wikipedia.
When asked what the market was going to do, J. P. Morgan reportedly said, "It will fluctuate." Morgan was right! This concept refers to putting a fixed amount of money into securities periodically. In so doing, one's average price per share is lower than the mean average price during the holding period. This is basic math: $100 buys 10 shares of a stock at $10, and 5 shares at $20 when the market is higher. The mean average price is $15. But the investor owns 15 shares and paid just $200 for an average price per share of just $13.33. TIP: A good approach for smaller investors just getting started, and also for IRAs. It works particularly well with diversified mutual funds.Thomas J. McAllister, CFP, McAllister Financial Planning, Carmel, IN