How Dollar-Cost Averaging (DCA) Works

DCA in 4 Steps

  1. Set a fixed amount to invest regularly (e.g. 200 EUR/month).
  2. Buy shares each month regardless of price.
  3. When the price drops, you buy more shares. When it rises, you buy fewer.
  4. Over time, your average purchase price smooths out.

Benefits of DCA

  • Removes emotion: no need to time the market.
  • Averages cost: reduces the impact of volatility.
  • Builds discipline: creates a regular investing habit.

6-Month Example

200 EUR/month at prices of 100, 90, 80, 95, 110, 105 EUR:

  • Total invested: 1,200 EUR
  • Shares accumulated: 12.55 shares
  • Weighted average price: ~95.60 EUR (vs. arithmetic average of 96.67 EUR)