Definition
An investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions, to reduce the impact of market volatility.
What to consider
- Invest a fixed amount at regular intervals to smooth out market highs and lows.
- This approach removes the stress of trying to time the market.
- Stick with it consistently for the best results.
Real world scenarios
- Each payday, Elena invests the same dollar amount into an index fund, buying more shares when prices are low and fewer when they’re high.
- Jose sticks with dollar-cost averaging even during market dips, avoiding emotional reactions. His routine builds discipline over years.
- Following this strategy, Vicky steadily grows her retirement account, enjoying the benefits of a consistent, hands-off approach.
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