Dollar-cost averaging

Investing a fixed amount at regular intervals regardless of price, rather than investing a lump sum all at once.

Example

Investing $200 on the first of every month rather than trying to time a single best moment to invest $2,400 for the year.

Important

It does not guarantee a better result than investing a lump sum - lump-sum investing wins more often historically, since markets rise more often than they fall - but it removes the need to guess a starting point, which is what actually gets people to invest consistently.

Related terms

• Time horizon — How long before you plan to spend the money you are investing.
• Volatility — How much and how often an asset's price moves, up or down, over a given period.

Lessons that explain it

• Time horizon — The same investment is a completely different bet depending on when you'll need the money. This is the variable that decides almost everything else. (10 min)

All 578 terms in the Investing glossary