Dollar-Cost Averaging Into the S&P 500: Does It Really Work?
Dollar-cost averaging (DCA) attempts to mitigate the emotional aspect of investing by taking some of the choice of when and how much to invest in a particular security out of the hands of the investor. With DCA, investors pick a target security and invest a fixed amount of money at regular intervals, regardless of what the price of that security is at any given time. DCA is a tool to limit risk.
While DCA can work for any security, many investors apply this technique to an investment in the S&P 500 Index, a broad collection of around 500 large-cap U.S. companies collectively representing about 80% of total market capitalization.
Key Takeaways
- Dollar-cost averaging (DCA) helps mitigate risk by spreading investments over time.
- DCA…
