Quant · Core
Dollar-Cost Averaging
Dollar-cost averaging is investing a fixed cash amount on a schedule — you buy more shares when price is down, fewer when up.
Definition
Equal cash clips on a calendar, not equal shares. Versus lump-sum, DCA reduces timing regret and usually lags in a rising market because cash sat idle. It is an implementation rule, not an alpha.
Why it matters
Payroll and 401(k) flow is DCA at scale. It is also how retail survives volatility without a process.
Case
A lump-sum into equities in March 2009 beat DCA for a decade. DCA into 2000–02 felt better and still compounded. The math and the stomach disagree.
How to read it
If the cash is already yours, lump-sum has the higher expected wealth in a positive-drift asset. DCA is a risk and behavior tool.
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