Portfolio

What is Dollar-Cost Averaging (DCA)?

Dollar-Cost Averaging is the US standard term for investing a fixed dollar amount at regular intervals (weekly, biweekly, monthly) regardless of market conditions, you automatically buy more shares when prices are low and fewer when high. Equivalent to a SIP / Rupee Cost Averaging in international markets like India.

Formula

Average Cost Per Share = Total Amount Invested Γ· Total Shares Acquired

How to Interpret

DCA removes the need to time the market and is the default discipline behind US 401(k) payroll deductions, IRA monthly auto-contributions, and brokerage recurring buys (Fidelity, Schwab, Vanguard, Robinhood all support it). Over a full market cycle, DCA typically results in a lower average cost than a single lump sum during volatile periods, though pure lump-sum investing wins about two-thirds of the time in trending bull markets.

Typical Ranges

Most effective over 5+ years in broad index funds (VTI, VOO, SPY, QQQ) or low-cost mutual funds. Combine with tax-advantaged accounts (401(k), Roth IRA) for maximum compounding.

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