How does dollar-cost averaging work?

Dollar-cost averaging is an investment strategy that involves consistently investing a fixed amount of money at regular intervals, regardless of the market conditions. This approach allows investors to purchase more shares when prices are low and fewer shares when prices are high, ultimately averaging out the cost per share over time.

By committing to a predetermined investment amount at consistent intervals, investors mitigate the risks associated with market volatility. This strategy encourages disciplined investing and helps prevent emotional decision-making influenced by market fluctuations. Rather than trying to time the market, which can be unpredictable, dollar-cost averaging focuses on a steady approach to investing, allowing for potentially more favorable returns in the long run.

The other options do not capture the essence of dollar-cost averaging, as they involve irregular or reactive investment patterns rather than the systematic, disciplined approach that characterizes this investment strategy.