Dollar-cost averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions. This approach eliminates the need to time the market, which can be difficult and risky. Instead of trying to buy low and sell high, you simply invest consistently over time. As we like to say at the office, “ it is time in the market not timing the market.”

One of the key benefits of DCA is that it helps investors avoid the common pitfall of market timing. Many investors try to predict market highs and lows, but predicting short-term market movements is notoriously challenging—even for experts. By sticking to a fixed investment schedule, you reduce the emotional stress of trying to "buy the dip" or "sell at the peak." Remove emotions from investing…the two do not mix well!

DCA also works to your advantage in volatile markets. When prices are lower, your fixed investment buys more shares, allowing you to capitalize on discounts. Conversely, when prices are higher, your fixed amount buys fewer shares. Over time, this strategy smooths out the impact of market fluctuations and can lower your average cost per share, increasing your potential for long-term growth.

The key to success with dollar-cost averaging is consistency. By committing to a set investment amount—whether in stocks, mutual funds, or ETFs—you can steadily build wealth over time. This approach aligns with the principle of long-term investing, reducing the temptation to make impulsive decisions based on short-term market changes.

Dollar Cost Averaging brings into focus what experience has shown us when it comes to investing: A disciplined, consistent, and long-term approach will help to avoid investment behavior tied to emotions and current news biases.

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