DCA is an abbreviation of Dollar-cost averaging. It means regularly putting a set amount of money into an investment account, usually monthly or quarterly.
DCA used in a sentence and practice
- ‘’One advantage of dollar-cost averaging is that you may remove the emotional component from your decision-making by investing automatically’’.
- ‘’You can generate a potentially greater profit from buying during dips and selling at the top. However, there’s broad consensus that DCA is a safer overall method of investing than lump sum buying and selling. It’s lower risk and lower reward but still offers the chance of benefiting from market swings.’’, Source: Gemini (crypto exchange).
- ‘’I want to invest some of my money, should I DCA or should I throw it all in at once?’’.
In addition, some papers show that you will have a higher expected return if you invest everything at once for 2 out of 3 times, versus DCA. Here is a 5-minute video that explains why lump sum investing might be better than DCAl: