Explanation
It spreads your entry point and removes emotion from the decision. It does not protect you when a market declines structurally.
01
Why it works
By investing the same amount each time, you automatically buy more units when the price is low and fewer when it is high. Your average purchase price therefore lands below the average of the prices. More importantly, it removes emotion from the decision, and that emotion costs most investors more than timing does.
02
Where it does not excel
In a market that only rises, a lump sum performs better on average — you are fully invested sooner. DCA is therefore not return optimisation but spreading risk over time. Pick a fixed interval, automate it, and revisit the amount at most once a year rather than at every price move.
Key takeaways
- Fixed amount, fixed interval, automated.
- Reduces timing risk, not market risk.
- Record each purchase separately for tax.