Lesson 5 of 5 · 6 min read
Periodic investing (DCA)
Contributing a fixed amount every month takes emotion and timing out of your hands. This is called dollar-cost averaging.
What is DCA?
Dollar-cost averaging (DCA) means: contributing a fixed amount at fixed moments, regardless of the price. Sometimes you buy expensive, sometimes cheap. On average you pay a fair price and never have to gamble on the 'perfect moment'.
Why it works
Almost no one manages to time the markets consistently. By contributing automatically and periodically, you actually buy more units when it is cheap and fewer when it is expensive. It also prevents fear or greed from driving your decisions.
Make it automatic
The power of DCA lies in consistency. Set up an automatic monthly contribution and let the compound interest effect do its work. Don't stare at the price, just keep going — also (especially!) when the market falls.
You put in $36,000. The other $42,139 is pure compound growth. Time does most of the work.
Remember this
- DCA means contributing a fixed amount at fixed moments, regardless of the price.
- This way you automatically buy more units when it is cheap and fewer when it is expensive.
- It takes emotion and timing out of your decisions — almost no one manages to time markets.
- Make the contribution automatic and keep going, especially when the market falls.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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