Investing a fixed amount every month: how dollar-cost averaging works

Dollar-cost averaging (DCA) means investing the same amount at regular intervals — say €100 on the 5th of every month — regardless of what the market is doing.

How it works

When prices are high, your €100 buys fewer units. When prices fall, the same €100 buys more. Over time, you avoid putting everything in at a single unlucky moment.

Your average cost is about €46 per unit, below the average price of the three months (€46.67), because you automatically bought more when it was cheap.

DCA vs investing a lump sum

If you already have a large sum, research generally finds that investing it all at once has beaten spreading it out more often than not, simply because markets rise more often than they fall. But for most small investors the question doesn’t arise: you invest from your salary as you earn it. Monthly investing is the natural way to do that.

If investing a big sum at once would keep you awake at night, spreading it over a few months is a reasonable compromise.

Why it’s the best habit for beginners

• No timing decisions. Nobody can predict short-term moves reliably; DCA removes the temptation.
• Builds discipline. Investing becomes a bill you pay yourself first.
• Turns crashes into opportunities psychologically: falling prices mean your monthly amount buys more.

How to automate it cheaply

• Many brokers offer savings plans (Sparpläne, plan de investiții) with low or no fees for ETFs.
• If your broker charges per order, invest less often (every two or three months) so the fee is a smaller share of each purchase.
• Set up a standing bank transfer on payday, and an automatic investment a few days later.

See what a monthly habit can grow into with our compound interest calculator.