Financial Terms / C - D / Dollar-cost averaging

Dollar-cost averaging

Dollar-cost averaging is an investing best practice wherein you invest a fixed amount of money at regular intervals without taking heed of the asset's price. It is generally linked to passive investing, where investors buy a fixed amount of an index like the S&P 500 at regular intervals (usually monthly).

Dollar-cost averaging helps you take out the emotions while investing as you invest a fixed amount of money every month regardless of market conditions. Emotional investing can cause investors to try and time the market, which results in lower-than-average returns over long periods.