Dollar Cost Averaging: How to Invest Without Stress

Trying to time the market bottom is a fool’s game. DCA is the strategy of buying a fixed dollar amount regardless of price. Here is why it turns market crashes into opportunities.

BMT Investment Research Team BMT Investment Research Team · 📅 Jan 2026 · ⏱️ 5 min read · INVESTING › STRATEGY
Emotion
Zero
Market TimingRemoved
Risk
Lower
Bad TimingMitigated
Setup
Auto
Set & ForgetEasy

How DCA Lowers Your Average Cost

Let’s assume you invest $1,000 every month. Suddenly, the market crashes by 50% and then recovers.

Month Stock Price Shares Bought ($1k)
January $50 20 shares
February (Crash) $25 40 shares
March (Recovery) $40 25 shares
TOTAL Avg: $38.33 85 shares
The Result
Even though the price ($40) is still lower than where you started ($50), you are profitable because you bought more shares when it was cheap.
Portfolio Value
Total Invested $3,000
Cash from your pocket.
Current Value $3,400
85 shares × $40.
Profit +$400
Despite market drop!
StrategyPsychology
Lump SumFear of Crash
DCAHope for Dip

What if I Have a Large Amount?

If you inherit $50,000, should you invest it all at once (Lump Sum) or spread it out (DCA)?

The “Math” vs. “Sleep” Dilemma

  • Mathematically: Lump Sum wins 66% of the time. (Because markets go up more often than they go down).
  • Psychologically: DCA wins 100% of the time.

Why DCA is Safer

If you invest $50,000 today and the market drops 20% tomorrow, you will panic and sell at a loss. If you DCA, you will be happy that next month’s buy is cheaper. The best strategy is the one you can stick to.

3 Steps to “Set It and Forget It”

DCA works best when you remove the human element. Do not log in to place trades. Automate it.

Step 1: Link Your Bank

Set up a recurring transfer (e.g., on the 1st of every month) from your checking account to your brokerage (Fidelity, Vanguard, etc.).

Step 2: Turn on “Auto-Invest”

Most modern brokers allow this. Select your fund (e.g., VOO or QQQM) and choose “Buy in Dollars”.

Step 3: Delete the App

Okay, maybe don’t delete it, but stop checking it daily. Let the machine do the work for 10-20 years.

Frequently Asked Questions

How often should I buy?
Weekly, Bi-weekly, or Monthly. The data shows very little difference in long-term returns. Matching your paycheck cycle (e.g., every payday) is usually the most convenient.
Does DCA work for individual stocks?
Yes, but it is riskier. If the individual company goes bankrupt (Price goes to $0), DCA just means you threw more money into a sinking ship. DCA works best with diversified ETFs that always recover eventually.