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title: Dollar Cost Averaging description: [AFW S.2.15] Investment Principle #15: Part 4/4 of "Shares". published: true date: 2026-06-30T08:08:12.915Z tags: editor: markdown dateCreated: 2021-04-20T18:01:31.658Z

Watch Shares vs Dollars (all 4 parts) VIDEO

"Dollar-cost averaging is almost real-time re-balancing." -Nick Murray

"The best time to invest in equities is whenever you have the money. It is the patient, disciplined equity accumulator — looking neither to the left at economic events nor to the right at market gyrations — who achieves his/her lifetime goals. This exquisitely rare accomplishment is never intellectual, but always temperamental.

Thus, if I suddenly came into a million after-tax dollars one day, it would all be invested in equities by nightfall. Never having experienced such a day, but instead having spent a career investing my net earnings, I have always been, however haphazardly, dollar cost averaging. That is to say: whenever I had money to invest, and the equity market was terrible, I all unwittingly acquired barrels full of panic-priced shares. And when I had investable sums in soaring markets, I (equally unconsciously) bought thimbleful of relatively overpriced shares.

And what was the only thing investors needed to do to enjoy these kinds of returns? Why, just keep buying." -From Nick Murray, NMI 2013 September.

Read Nick's NMS 09 - Volatility is the accumulator's best friend PDF


What is Dollar Cost Averaging?

Dollar-Cost Averaging (DCA) is an investment strategy designed to reduce volatility in which mutual fund shares are purchased in fixed dollar amounts at regular intervals, regardless of what direction the market is moving. Thus, as prices of securities rise, fewer units are bought, and as prices fall, more units are bought.

Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years.

DCA has been called the "dumb man's revenge" because over the long-term it can outperform "market timing" and sporadic deposits.

Watch the video overview with David McDanal VIDEO

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"This is a testimony to the genius of dollar-cost averaging, which all long-term accumulators practice, formally or informally, because we have no choice: we're investing what we can save from what we earn, and this process is ongoing. Investing over time into a meaningfully diversified equity portfolio, aided by annual rebalancing, inevitably loads up on the laggards and eschews what's hot, thereby insuring that we outperform not just the markets but our own investments." -Nick's NMI newsletter, 2018 August.


Benefits of DCA

  • It's Smart. Buying more units when prices are low and fewer units when prices are high is a good way to reduce the average cost per unit.

  • It's Automatic. With an Electronic Fund Transfer depopsits occur systematically from your checking account into your mutual fund.

  • It's Affordable. With American Funds you can do as little as $50 per month. With most VA's it is $100.

  • It's Painless. The process is simple: fill out the DCA Form at purchase (or at any time after purchase), and DCA transfers will begin immediately.

  • It's Disciplined. Dollar cost averaging takes the emotion out of investing. You can stop asking yourself, "When's the right time to buy?" It eliminates the issue of “market timing.” As a result, an investor's returns will be determined more by the overall trend in a given fund as opposed to the investor's specific entry price. In addition, it helps investors reduce their cost basis on securities that decline in value.


Benefits to You (the Advisor)

  • DCA creates the highest-profit residual income.
  • DCA often builds their account values more than they expect, and this makes you look like a hero.


Should you DCA if you have a Lump-Sum?

Historical analyses across various markets and time periods1 indicate that lump-sum investing has outperformed dollar-cost averaging in approximately two-thirds of cases, as equity markets have tended to rise over the long term. Nevertheless, DCA remains a prudent choice for investors who are unsing monthly income to fund the account, or don't have a lump-sum to invest.

Short answer? No. (This is my opinion, and not a fact.) If you have money, get it in the market ASAP and let it grow! Money invested sooner has more time to grow than money invested later.

Read Nick's ATY 110 April 20 - Don't DCA With Lump Sums PDF

Read Nick's NMS 68 - Invest lump sum or invest gradually? PDF

Read the article Even God Couldn’t Beat Dollar-Cost Averaging WEB {.is-info}