What is dollar-cost averaging?

Dollar-cost averaging (DCA) is a steady and systematic investment strategy where an investor regularly contributes a fixed amount of money into an investment, regardless of the asset’s price.

Market prices fluctuate by nature. By investing a consistent amount regularly and spreading out those purchases over time, dollar-cost averaging aims to reduce the impact of market volatility. These contributions may be made weekly, monthly, or quarterly, for example.

Dollar-cost averaging prevents investors from trying to time the markets or make emotion-induced investment decisions. Because they invest over an extended period of time, dollar-cost averaging can potentially reduce the impact of short-term market fluctuations.

Over the long term, dollar-cost averaging can also help investors benefit from compounded interest. By consistently contributing capital, they can earn more interest over time.

Subscribe to our newsletter to learn more about Alto.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Explore more terms


Private equity