In plain words: Investing a fixed amount at regular intervals regardless of price, which smooths the average entry price over time.
Dollar-cost averaging is the habit of investing the same amount on a regular schedule — say monthly — no matter what prices are doing that week. By spreading purchases out, it removes the pressure of trying to pick the perfect moment to invest.
How does dollar-cost averaging smooth the price?
Because the amount stays fixed, the same money buys more units when prices are low and fewer when prices are high. Over many periods this blends into an average entry price, so a single sharp move in global equities matters less than it would for one large lump-sum purchase.
Why might someone invest this way?
Investing steadily can make volatility feel more manageable, since ups and downs become part of the routine rather than a reason to hesitate. Building this regular habit is part of how a portfolio is built. It is a process, not a forecast about where prices are heading.
Key takeaways
- Dollar-cost averaging invests a fixed amount on a regular schedule.
- The same money buys more units when prices fall and fewer when they rise.
- It smooths the average entry price and can ease the pull of market timing.