Snackable
INVESTING
04 MIN READ

DOLLAR-COST AVERAGING

THE SIMPLE STRATEGY THAT REMOVES EMOTION AND TIMING FROM INVESTING.

KEY TAKEAWAY

DOLLAR-COST AVERAGING MEANS INVESTING THE SAME AMOUNT OF MONEY AT REGULAR INTERVALS, REGARDLESS OF MARKET CONDITIONS.

HOW IT WORKS

instead of trying to time the market, you invest a fixed amount every month (or week, or quarter). when prices are high, you buy fewer shares. when prices are low, you buy more shares.

over time, this averages out your purchase price and reduces the impact of market volatility.

EXAMPLE

let's say you invest $500 every month in an index fund:

month 1: stock price $50buy 10 shares
month 2: stock price $25buy 20 shares
month 3: stock price $100buy 5 shares
total: $1,500 invested35 shares owned
average cost per share: $42.86

BENEFITS

reduces timing risk - you don't need to guess when to buy
removes emotion - you invest consistently regardless of fear or greed
builds discipline - creates a regular investing habit
accessible - you can start with small amounts

WHEN TO USE IT

dollar-cost averaging works best for long-term investing (5+ years) in diversified investments like index funds. it's perfect for retirement accounts like 401(k)s and iras.

it's less effective for short-term goals or when you have a large lump sum to invest (in that case, investing it all at once often performs better historically).

QUICK ACTION

set up automatic investing in your brokerage account. even $50-100 per month can grow significantly over time thanks to compound interest.