What is dollar-cost averaging and should I use it?

Dollar-cost averaging (DCA) means investing a fixed amount at regular intervals — say, $500 every month — regardless of whether the market is up or down. When prices are high, your $500 buys fewer shares; when prices are low, it buys more. Over time, this averages out your purchase price and removes the anxiety of 'timing the market.' For most people with regular paychecks, DCA happens naturally via 401(k) contributions every pay period. It is particularly useful when you are sitting on a lump sum you are nervous about investing all at once — though research shows that lump-sum investing outperforms DCA about two-thirds of the time over longer horizons.