What does DCA mean?

Learn more about one of the most popular investment strategies.

Aug 3, 2025

Dollar-cost averaging (DCA) is a strategy in investing in which the investor divides up the total amount to be invested across periodic purchases of a selected asset. It’s a simple and effective way to reduce the risk of investing in a volatile market.

The idea behind dollar-cost averaging is to reduce the risk of investing a large sum of money all at once. By dividing the total invested amount over multiple purchases, the investor can spread out their risk and reduce the potential losses due to market volatility. This also allows taking advantage of price changes by purchasing more of the target asset when the price is low and less when higher.

For example, if an investor wants to invest $1000 in an instrument, they can purchase company stocks for the whole amount all at once. If the instrument price drops after the purchase, they will lose a significant part of the investment. The investor might also divide the $1,000 into five separate $200 purchases made at various points in time. In this case, if the stock price drops after the first purchase, the losses will be slightly lower, as of the smaller amount invested.

Being relatively safe, the “DCA” strategy might be a good choice for beginners that don’t want to risk too much of their capital and those who don’t have the time to actively manage their investments. By spreading out the total investment across multiple purchases, you can reduce the risk and take advantage of market fluctuations.

Power up your investment knowledge

www.investing.one is solely and exclusively operated by Tradeplace Limited (Registration number HE 434666). Tradeplace Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (License number 455/25).

The information on this website is general in nature. Please consider the information in light of your objectives, financial situation and needs.

When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.

We do not establish accounts to residents outside of the EU/EEA area. For further details please see the Client Agreement - Terms and Conditions. For privacy and data protection related complaints and information on handling personal data please refer to our Privacy Policy.

©2025 Investing.one. All Rights Reserved.