Dollar-cost averaging (DCA)

Dollar-cost averaging (DCA) is the practice of investing a fixed dollar amount into an asset at regular intervals — weekly, monthly, or on any consistent schedule — regardless of where the price is at the time. Because the amount is fixed, the same $100 buys more units when the price is low and fewer units when the price is high. Over many periods this mechanical rule produces an average cost per unit that is lower than the simple average of the prices paid.

Formula for average cost:

avgCost = totalDollarsInvested / totalUnitsPurchased

Worked example. Three monthly purchases of $300:

| Month | Price | Units bought | |-------|---------|--------------| | 1 | $30,000 | 0.01000 | | 2 | $20,000 | 0.01500 | | 3 | $60,000 | 0.00500 |

Total invested: $900. Total units: 0.03. Average cost: $30,000. Simple average of prices: $36,667. DCA beat lump-sum timing by $6,667 per unit here.

DCA does not guarantee a profit and does not prevent losses in a sustained downtrend. It reduces timing risk by spreading exposure, not by predicting direction.

Model different schedules and see how your average entry shifts with the DCA calculator.