Dollar-cost averaging (DCA) commits a fixed amount at regular intervals regardless of market conditions. It replaces the search for perfect timing with a repeatable contribution rule. section 7.3.2
Use DCA as a risk-management technique, while keeping its trade-offs visible:
- Regular purchases reduce the risk of investing the entire amount near a market peak and smooth volatility over time. section 7.3.2
- DCA is not perfect timing and does not remove investment risk; the strategy should fit the investor’s risk tolerance. section 7.3.2
- A balanced allocation can direct a fixed amount to index funds while reserving a smaller portion for individual investments. section 7.3.2
