Dollar-Cost Averaging
Investing a fixed amount on a fixed schedule regardless of price.
What is Dollar-Cost Averaging?
Buys more shares when prices are low and fewer when high, lowering average cost per share and removing timing decisions. Statistically, lump-sum investing beats DCA more often; DCA's real value is behavioral.
Dollar-Cost Averaging: a worked example
$500 monthly buys 10 shares at $50 and 12.5 at $40.
More terms in Portfolio Management
Asset Allocation
How a portfolio is split across stocks, bonds, cash, and alternatives.
Rebalancing
Periodically restoring the portfolio to its target weights.
Modern Portfolio Theory (MPT)
Optimize the portfolio as a whole, not security by security.
Efficient Frontier
The set of portfolios with the best return for each level of risk.
Capital Asset Pricing Model (CAPM)
Expected return = risk-free rate + beta x market risk premium.
Efficient Market Hypothesis
Prices already reflect available information.
Compound Annual Growth Rate (CAGR)
The smoothed annual rate that gets you from start to end value.
Total Return
Price change plus income, as a single return figure.