Dollar-Cost Averaging - DCA

Dollar-Cost Averaging - DCA

The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

Notes:

Eventually the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.

In the U.K., it is known as "pound-cost averaging".

See also: Automatic Investment Plan, Average Down, Average Up, Compounding, DRIP, Mutual Funds