Dollar cost averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the asset's price. When prices are high, your fixed amount buys fewer shares. When prices are low, the same amount buys more shares. Over time, this tends to lower your average cost per share compared to making a single lump-sum purchase at the wrong time.

The main advantage of DCA is that it removes the emotional challenge of trying to time the market. Instead of agonizing over whether now is the right time to invest, you simply invest consistently and let the strategy work through market cycles. This disciplined approach is especially effective for long-term goals like retirement savings or building a college fund.

While research shows that lump-sum investing produces higher returns about two-thirds of the time (because markets tend to rise), DCA produces better risk-adjusted results for investors who are sensitive to short-term losses. The psychological benefit of avoiding a large loss right after investing a lump sum can be worth more than the slightly higher expected return of investing all at once.