Use DCA correctly. What it solves and what it does not.
Definition
DCA is buying a fixed amount on a schedule. It reduces timing stress and emotional decisions.
What DCA helps with
- Fear of buying at the top.
- Waiting forever for perfect entry.
- Overreacting to daily volatility.
What DCA does not solve
DCA does not make bad assets good. You still need a thesis and risk control. It simply spreads your entry points.
Simple DCA plan
- Pick asset and max allocation.
- Choose weekly or biweekly schedule.
- Automate if possible.
- Review quarterly.
Practical tip
Keep fees low. Do not change your schedule because you feel confident or scared.
Warning
DCA is a long game. If you stop on every dip, you lose the benefit.
Quick quiz
- Define DCA.
- Name one thing DCA helps.
- Name one thing DCA does not solve.