Dollar-Cost Averaging Explained (And Why It Beats 'Waiting for the Dip')
Investing the same amount on the same day every month removes timing from the equation. Here's why it works.
Dollar-cost averaging (DCA) means investing a fixed amount on a fixed schedule, regardless of price. When the market drops, your dollars buy more shares. When it rises, fewer. Over time you get a smoothed-out average price — and you completely sidestep the impossible task of timing the market.
Why timing the market almost never works
Decades of data from S&P, Morningstar, and Vanguard show that missing just the 10 best market days over a 20-year period cuts your returns roughly in half. Those days cluster suspiciously close to the worst ones — meaning anyone trying to dodge crashes typically misses the rebounds too.
The boring system that wins
Pick an amount. Pick a date. Automate the transfer. Buy the same index fund every month, forever. Pair it with rebalancing once a year. That's the entire system.
- DCA replaces 'when to buy' with 'how often.'
- Missing the 10 best days a decade cuts returns in half.
- Automate everything. Boring wins.
Go deeper with these
The Simple Path to Wealth
The clearest, friendliest case for low-cost index investing ever written. A modern classic.
The Bogleheads' Guide to Investing
Straightforward, low-cost, long-term investing wisdom from the followers of Jack Bogle.
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