Does Dollar Cost Averaging (DCA) Work?

What is DCA?

Dollar cost averaging is an investing technique intended to reduce exposure to risk associated with making a single large purchase. The idea is simple: spend a fixed dollar amount at regular intervals (e.g., monthly) on a particular investment or portfolio/part of a portfolio, regardless of the share price. In this way, more shares are purchased when prices are low and fewer shares are bought when prices are high. The premise of dollar cost averaging is that the investor wants to guard against the market losing value shortly after making his investment. Therefore, he chooses to spread his investment over a number of periods. (From Wikipedia)

According to these two articles they don’t.  Click the links to find out.

MSN Money Mutual Funds: The costly myth of dollar-cost averaging – By Timothy Middleton

Popular wisdom says scheduling your investments is the best way to make money. But it’s actually a sales gimmick to wheedle over time what you won’t commit up front.

USA Today: Dollar-cost averaging’s not all it’s cracked up to be – Investing By John Waggoner

Sometimes, things aren’t as bad as they seem. They’re worse.

You don’t want to crash through the floor when you’re checking for termites. And when the doctor checks out that nagging rash, the four words you don’t want to hear are, “Nurse, evacuate the building.”

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