Dollar-cost averaging occurs when you invest your money over a period of time instead of trying to “time the market” with a lump-sum investment.
You may already be dollar-cost averaging without realizing it when you make regular contributions to your retirement plan. When done properly, this consistent approach to investing may help you get more shares for your money in certain market situations.
Potential benefits
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Investing on “auto-pilot” may help prevent impulse decisions.
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Regularly timed contributions may help manage risk.
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You may get more shares at a lower price.
Possible downsides
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Lump-sum investments may perform better over time.
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Holding back your money may mean missed opportunities.