Dollar-cost averaging

Investing · Difficulty: Beginner

Education only. Delayed data. Past results do not predict future results. Not financial advice, and no strategy here promises a profit. Every strategy can lose money, and a rule that worked on past charts may stop working. Practise with virtual money first.

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The idea

Invest the same amount on a regular schedule, regardless of price. You buy more units when prices are low and fewer when they are high, which reduces the need to time the market.

Indicators and settings

None needed. A long-term SMA helps you see the bigger picture.

Entry rule

Choose a diversified, low-cost fund you understand, a fixed amount and a fixed schedule (for example fortnightly). Buy on schedule.

Exit rule

Define your goal and time horizon in advance. Review the plan occasionally rather than reacting to headlines.

Stop-loss and risk rule

Only invest money you will not need soon. DCA does not stop losses in a falling market and does not guarantee a profit.

Best conditions

Long horizons and regular income.

Pitfalls

It can underperform investing a lump sum in a rising market.
Fees can eat small regular purchases.
On the desk you can only practise the idea by repeating equal-size buys.

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Illustration only; ignores slippage, tax and most costs. Not financial advice.