Why not buy more shares when they're cheap and fewer when they're pricey?
Image: Fred Hsu on en.wikipedia, CC BY-SA 4.0, via Wikimedia Commons
dollar-cost averaging achieves
Why not buy more shares when they're cheap and fewer when they're pricey?
Imagine you're at a grocery store with a fixed budget for snacks. If chocolate bars are cheaper one day and more expensive the next, you want to buy more when they're cheap and less when they're pricey.
Dollar cost averaging (DCA) is like shopping for snacks with a set budget. You buy more when prices are low and less when they're high, smoothing out the cost over time.
Example
If you buy 10 chocolate bars for 1 each on a sale day and 5 bars for 2 each when they're back to normal price, you're spreading the cost evenly.
Remember this
Dollar cost averaging (DCA) helps you buy more shares when prices are low and less when they're high, reducing the average cost of your investments.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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