How to invest with dollar cost averaging (DCA)? 6 simple strategies

Discover investment tips for dollar cost averaging

Investing can seem like a guessing game: when to buy, when to sell, will the market go up or down? But what if there was a way to invest that could help you reduce the risk of getting in at the “wrong time”? The good news is that this strategy exists, has a name, and is widely used by experienced investors in the US: it’s called Dollar-Cost Averaging (DCA).

In this post, we’ll explain what DCA is, how it works in practice, and show you 5 simple strategies to apply this technique with more confidence. Want to simplify your investment?

What is DCA, anyway?

DCA is a way of investing a fixed amount of money at regular intervals, regardless of the asset’s price. Instead of trying to time the market (spoiler: almost no one can do that consistently), you invest gradually, weekly, biweekly, or monthly.

For example, let’s say you invest $200 in an index fund (like the S&P 500) every month. In some months, that amount will buy more shares (if prices are low); in others, fewer shares (if prices are high). Over time, the average price of your purchases tends to smooth out, hence the name cost averaging.

1. Automate your contributions

The first tip is to make the process as easy as possible. Most U.S. brokerages allow you to schedule automatic investments, you choose the amount, the asset, and the frequency, and you’re good to go.

Automation helps you stay consistent and avoid the temptation to “guess” the right time to invest. Example: Set up a $100 weekly investment in an ETF like VTI (Vanguard Total Stock Market ETF).

2. Choose consistent assets

Since DCA is a long-term strategy, it’s essential to invest in assets with a solid track record and real value. Broad ETFs, like SPY (S&P 500) or VOO, are good choices for those seeking stability and diversification.

Avoid highly speculative assets (like penny stocks or memecoins), cost averaging only makes sense if the asset has a long-term growth trend.

3. Pick a comfortable amount

There’s no point in trying to invest an amount that will leave you stressed. The secret to DCA is consistency. It’s better to invest $50 every month for years than to put in $500 once and stop.

Start with an amount that fits your budget and increase it as you go.

4. Stick with it through tough times

It’s natural to want to stop investing when the market is down, but that’s when DCA really shines. Remember, you buy more shares when prices fall, which lowers your average cost and can boost your returns when the market recovers.

Pro tip: try not to check the market every day. Focus on the long term.

5. Review your plan every 6 months

DCA doesn’t mean ignoring your investments. Every 6 months, review your contributions, check if the asset still makes sense, if the amount is still right, and whether your financial situation has changed.This is your chance to adjust the course if needed without panic.

6. Combine DCA with dividend reinvestment

Another way to boost your long-term results is to reinvest the dividends you receive from your investments.

Many ETFs and stocks pay out quarterly dividends, and reinvesting them — instead of cashing out, helps grow your portfolio faster through compounding.

If you’re using DCA to invest regularly and also reinvesting dividends, you’re putting your money to work in two smart ways: consistently adding funds and maximizing every return.

Tip: Most brokerages offer a “DRIP” (Dividend Reinvestment Plan) feature that lets you automatically reinvest dividends into the same asset.

Conclusion

Dollar-Cost Averaging is one of those strategies that seems simple, and it really is, but delivers powerful results over time. It’s a smart way to start investing, especially if you don’t want to monitor the market every day.

Whether you’re a beginner or just want to make your investing more consistent, DCA can be your best friend. Remember: the important thing is to start. And keep going.

Written by

Juliana Raquel