What Is Dollar-Cost Averaging And 4 Reasons Not To Use It

Dollar-cost averaging is an intelligent way to invest no matter how much money you have.

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Dollar-cost averaging (DCA) is a method for investing where an investor makes regular purchases of a target asset at set intervals, regardless of price, to lessen the impact of volatility.

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Dollar-Cost Averaging Example

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Dollar-cost averaging is a way to buy stocks at a fixed schedule but at different prices. It enables an investor to buy shares at an average price rather than a fixed price.

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How Dollar-Cost Averaging Works

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Let’s take a look at the following three market scenarios:

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Falling Market When the stock market falls, investors indulge in panic and selling. If you are unwilling to lose some percentage, you must be willing to dollar-cost average in declining markets.

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What Is Dollar-Cost Averaging And 4 Reasons Not To Use It

Dollar-cost averaging is an intelligent way to invest no matter how much money you have.

Dollar-cost averaging (DCA) is a method for investing where an investor makes regular purchases of a target asset at set intervals, regardless of price, to lessen the impact of volatility.

Dollar-Cost Averaging Example

Investors buy more shares when the price per share drops below what they paid for them.

Dollar-cost averaging is a way to buy stocks at a fixed schedule but at different prices. It enables an investor to buy shares at an average price rather than a fixed price.

How Dollar-Cost Averaging Works

First, dollar-cost averaging works only if you are willing to invest, whether the stock prices are low or high.

Let’s take a look at the following three market scenarios:

Rising Market If the market continues to rise, the investor will make a profit on the purchase made in the second month.

Falling Market When the stock market falls, investors indulge in panic and selling. If you are unwilling to lose some percentage, you must be willing to dollar-cost average in declining markets.

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