How does dollar-cost averaging work?

Dollar-cost averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the asset’s price. This method reduces the risk of investing a large sum at the wrong time, especially in volatile markets. By consistently buying over time, you purchase more shares when prices are low and fewer when prices are high, lowering your average cost per share. This disciplined approach removes emotional decision-making and encourages long-term investing. DCA is often used for buying stocks, mutual funds, or ETFs and is especially helpful for new investors or those building a retirement portfolio gradually. While it doesn’t guarantee profits, it helps manage risk over time.