Dollar-cost averaging is a smart way to invest money by spreading out your purchases over time. Instead of investing all your money at once, you invest a fixed amount on a regular schedule, like every week or month. This method helps protect you from buying everything at a high price and reduces the impact of market ups and downs.
Let’s say you decide to invest $100 every month into a stock. Some months, the stock will be more expensive, so you’ll buy fewer shares. Other months, when the price is lower, you’ll get more shares for your $100. Over time, this averages out the cost you pay for each share, which can help lower your overall risk.
One of the best things about dollar-cost averaging is that it makes investing easier and less stressful. You don’t have to worry about finding the “perfect” time to invest. Instead, you stick to a plan and stay consistent. This approach encourages good habits, like investing regularly and thinking long-term.
It’s especially useful for beginner investors or people who want to invest without trying to time the market. Whether the market is up or down, you keep investing. That discipline can lead to better results in the long run and help you grow your wealth steadily.
