Dollar cost averaging
Training 705 minutesdollar cost averaging
You are 26 and drive long-haul trucks. You have $250 spare each month, and it always feels like the wrong moment to buy.
Training goal: Invest on a schedule, not on a hunch
▶ Play this trainingSituation
1. A fund trades at $50, $25, then $50 over 3 months. You put in $250 each month. How do you end up?
- Break even: the price is back at $50
- Up $250, average price $37.50
- A loss, there was a down month
2. Headlines: "Market at record high, crash coming." You want to skip this month and wait.
- Wait for a 10% dip, then buy
- Invest the $250 as planned
- Sell everything and wait for the crash
3. The market is down for a third month, 25% in total. Your job is fine and the cushion intact, but continuing feels scary.
- Pause until it recovers
- Continue: shares are on sale
- Borrow and buy more
4. You inherit $6,000. Invest it all now or $1,000 a month for six months?
- Keep it in cash until things are clear
- All into one stock from the news
- Either way, as long as it follows a written plan
What you will learn
- Equal deposits buy more shares when prices are low.
- Timing the market rarely works. Consistency does.
- Keep investing through drops while your income and cushion hold.
Your real-life step
Set an automatic transfer to your investment account for the day after payday. Any amount, as long as it repeats.
Questions and answers
What is dollar cost averaging?
Investing the same amount at regular intervals regardless of price. This tends to lower your average cost per share.
Is lump sum better than dollar cost averaging?
Historically, lump sum won about two times in three. Spreading it out is easier emotionally and limits the risk of bad timing.
How often should I invest?
Tie it to your paycheck: monthly or every two weeks. Consistency matters more than the exact schedule.
More trainings in this module
- How to start investing
- Risk vs return
- What are stocks
- What are bonds
- Index funds and ETFs
- Diversification
Numbers are illustrative. A game, not financial advice.