Most people recommend dollar-cost averaging as a measured way of starting to invest. But what is it exactly, and what kind of investor is it suited for? In this article, we’ll weigh the benefits of dollar-cost averaging before considering how lump-sum investing might be better, so you can choose the most suitable investment strategy for you.
What is dollar-cost averaging and how does it work?
Dollar-cost averaging (DCA) refers to periodic, recurring investments of a fixed amount of money into a specific asset. You can either have a total investment amount in mind or have an ongoing investment, as a savings plan.
For example, imagine that you have decided to invest a fixed sum of $1,000 on the 1st of every month. This means that regardless of the state of and your opinions on the stock market, the country you happen to be in, whether your salary comes in early, or even if...