Dollar-Cost Averaging - DCA


Dollar-Cost Averaging - DCA
The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

Also referred to as a "constant dollar plan".

Eventually, the average cost per share of the security will become smaller and smaller. Dollar-cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.

For example, you decide to purchase $100 worth of XYZ each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four additional shares this time. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each.

In the U.K., it is known as "pound-cost averaging".


Investment dictionary. . 2012.

Look at other dictionaries:

  • dollar-cost averaging — ˌdollar cost ˈaveraging noun [uncountable] FINANCE when a small amount of money is invested in the same stock over a period of time: • If the stock market continues to rise over the long term, dollar cost averaging almost guarantees investment… …   Financial and business terms

  • Dollar cost averaging — план инвестирования, предусматривающий наращивание вложений путем инвестирования на регулярной основе фиксированной суммы. См. также: Планы инвестирования во взаимные фонды Финансовый словарь Финам …   Финансовый словарь

  • dollar (cost) averaging — n. see AVERAGE (vi. 3) * * * …   Universalium

  • dollar (cost) averaging — n. see AVERAGE (vi. 3) …   English World dictionary

  • dollar (cost) averaging — n. see AVERAGE (vi. 3) …   English World dictionary

  • dollar cost averaging — See: constant dollar plan * * * dollar cost averaging UK US noun [U] FINANCE ► in the US, the type of investment plan in which an investor invests a particular amount of money regularly, especially in a mutual fund, whether prices are going up or …   Financial and business terms

  • dollar cost averaging — /ˌdɒlər kɒst æv(ə)rɪdʒɪŋ/ noun ⇒ pound cost averaging …   Dictionary of banking and finance

  • dollar cost averaging — noun Date: circa 1957 investment in a security at regular intervals of a uniform sum regardless of the price level in order to obtain an overall reduction in cost per unit called also dollar averaging …   New Collegiate Dictionary

  • dollar-cost averaging — ˈ ̷ ̷  ̷ ̷ ˈ ̷ ̷ noun : dollar averaging …   Useful english dictionary

  • DOLLAR COST AVERAGING — инвестиционная стратегия, предусматривающая наращивание вложений путем инвестирования на регулярной основе фиксированной суммы; В долгосрочном периоде данный метод усреднения цены покупки/продажи может оказаться эффективным; …   Глоссарий финансовых и биржевых терминов

  • cost averaging — UK US noun [U] ► STOCK MARKET regular investment of a fixed sum of money so that you buy more shares when the price is low and fewer shares when the price is high: dollar/pound, etc. cost averaging »With pound cost averaging you even out the… …   Financial and business terms