Dollar-cost averaging

In One Sentence

Buy a fixed amount at the same time every month without watching the market: when the money is there, it goes in.

Why It Matters

Dollar-cost averaging isn't a trick for catching the bottom. It's a way to stop guessing: when prices are low, the same money simply buys more. If you already have a large lump sum, research shows that investing it all at once usually beats spreading it out; dollar-cost averaging is for people with a monthly income. What you really need to avoid is hoarding cash while you wait for a crash.

One Number

In the US from 1934 to 2026, investing everything every month and never selling grew your money to 120 times what you put in. Keeping 10% to 20% in cash each month and waiting for a 15% to 30% fall before investing it actually left you 0.6% to 5.7% behind (author's backtests · Chapter V).

In the Book

Chapter V puts it at the heart of the "one-sentence method" and compares three approaches: investing a lump sum, dollar-cost averaging and waiting for a dip. Chapter IV and Chapter VI both remind you to keep buying at your usual pace, whether the market is hot or cold.

Go Further

• Broad-market index ETFs What you buy every month is a passive broad-market index ETF.
• Buying in crashes When markets crash, add a little more from new income.
• The timing trap By not guessing highs and lows, you sidestep the timing trap.
• Simplicity Set it up once and follow it for decades — that's simplicity in action.
• The retirement gap Investing small amounts steadily every month is how you close the retirement gap.