DCA (Dollar Cost Averaging) means investing a fixed amount at regular intervals (weekly, monthly, quarterly) into the same asset, regardless of its price at purchase.
Example: you invest $200 every 1st of the month into an S&P 500 ETF. When the market drops, your $200 buys more shares. When it rises, fewer. Average purchase price smooths out automatically, and you avoid the emotional trap of "market timing".
Why it works:
- Removes timing: no more "should I buy now or wait for a dip?"
- Automated discipline: scheduled transfer at your broker → zero emotional friction
- Benefits from downturns: a crash becomes an opportunity (buying at discount) rather than a disaster
- Statistically strong long-term on assets in long-term uptrend (S&P 500, MSCI World, Bitcoin over 10+ years)
Limitations:
- NOT suitable for assets without long-term uptrend (risky single stocks, exotic altcoins)
- Lump-sum (investing all at once) statistically beats DCA 67% of the time per Vanguard studies, because markets rise more often than they fall. DCA only wins emotionally (reduces regret if market drops right after)
Pro strategy: monthly DCA into MSCI World or S&P 500 ETF for 20+ years = the simplest and most effective investment strategy for 95% of retail investors, outperforming most hedge funds after fees.