In stock-market investing, what is dollar-cost averaging?

In stock-market investing, dollar-cost averaging means investing fixed amounts regularly, regardless of the security’s current price. A scheduled contribution buys more shares when prices are lower and fewer when prices are higher.

For example, an investor might put $200 into a diversified fund every month. The approach spreads purchases over time rather than requiring a single decision about the best entry date.

Dollar-cost averaging does not guarantee a profit or prevent losses. If an asset rises steadily, investing a lump sum earlier may produce a higher return than holding cash and investing gradually. Fees, taxes, and the chosen asset also affect results.

The method is often used with payroll contributions and retirement plans because it creates a repeatable saving habit. It is a contribution schedule, not a guarantee about market direction.