Dollar-cost averaging
What is dollar-cost averaging?
Dollar-cost averaging means investing a fixed amount on a fixed schedule regardless of price. It removes the need to decide when to invest, and it buys more shares when prices are lower.
- Written by
- Suggested Investments Research Team
- Content type
- Reference definition
- Published
- 2026-09-13
- Last reviewed
- 2026-09-13
What it does and does not do
It controls behaviour, not risk of loss. A falling market still falls; what changes is that your next contribution buys at the lower price instead of waiting for a bottom nobody can identify in advance.
Schedule beats prediction
Because contributions are automatic, the only remaining decision is where the money goes. That is the question our six research lenses exist to inform.
A worked example
Contributing $250 twice a month for a year means 24 purchases at 24 different prices. Your average cost is the average of those prices weighted by shares bought, which is mathematically lower than the average price paid per purchase.
The mistake people make
Treating dollar-cost averaging as a guarantee. It is a discipline for staying invested, not a shield against permanent loss in a weak business.
How we use it
Dollar-cost averaging answers when. Our research answers where. Those are separate decisions and we keep them separate on purpose.
Related terms
Sources and methodology
- Investor.gov investor education — U.S. Securities and Exchange CommissionPrimary source
- The Bumpy Road to Outperformance — Vanguard Research
Keep reading
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Educational information only. Nothing here is a recommendation to buy or sell any investment, and no research measurement removes the risk of loss.