What is dollar-cost averaging and does it work?

Dollar-cost averaging (DCA) means investing a fixed amount at regular intervals (e.g., $300 into an S&P 500 ETF on the 1st of every month) regardless of market conditions. DCA reduces the impact of market volatility — you buy more shares when prices are low and fewer when prices are high. Research shows DCA does not outperform lump-sum investing when measured over time, but it significantly reduces the psychological risk of bad market timing and builds investing discipline.