Dollar cost averaging (DCA) has to be one of the most commonly thrown about terms when it comes to investing. Let’s talk about how it works, why it works (or not), and why it doesn’t really matter whether it works. A primer to DCA DCA means investing a fixed amount of money each month, as opposed to putting a lump sum all at once. This reduces the risk of buying at the wrong time as your investment is spread across time. Let’s assume the following example of a hypothetical fund:

Month	Unit Price	Invested Amount	Units Bought
April	$1.00	$500	500
May	$0.92	$500	543
June	$0.87	$500	575
July	$0.89	$500	562
August	$0.92	$500	543
September	$0.93	$500	538
Total	$0.92 average	$3,000	3,261 ($3,033)

As one would expect from investments, prices tend fluctuate and be volatile in the short term. Here, DCA manages some of the volatility. A $3,000 investment in the month of April would buy 3,000 units, which would be $2,790 in September. A DCA strategy, on the other hand, buys more units as the prices slip,...