What is dollar-cost averaging and does it really work?

Dollar-cost averaging means investing a fixed amount on a regular schedule — say $500 every payday — no matter what the market is doing. Because your fixed dollars buy more shares when prices are low and fewer when prices are high, you avoid the trap of trying to time the market and you smooth out your average purchase price over time. Its real power is behavioral: it turns investing into an automatic habit and keeps you buying through downturns, exactly when fear tempts most people to stop. For anyone investing out of each paycheck, it's simply how the math works, and it's a sound approach. The one nuance: if you receive a large lump sum, historical data slightly favors investing it all at once rather than spreading it out, since markets rise more often than they fall — but doing so gradually can ease the anxiety.