Typical investment advice either sounds incomprehensible (“The blockchain does the hokeypokey and fiat currency goes the way of the dodo!”) or too simple (“Just get in on the ground floor of the next Apple!”) and does very little to help the average person become an investor. This kind of standard advice doesn’t work because it assumes investing is a onetime event.

Instead, newbie investors should look at growing their money as a consistent habit. Habitual investing allows you to take advantage of the so-easy-it’s-complicated advice to “buy low and sell high.” That’s because consistency is the key to an investment strategy called dollar-cost averaging.

Here’s what you need to know about how dollar-cost averaging works and how it can protect your money from market fluctuations.

What is dollar-cost averaging?

When you use the dollar-cost averaging strategy, you invest the same amount into an asset at regular intervals. This practice ensures that you are consistently investing a set amount of money, which is an important part of retirement planning.

But dollar-cost averaging also ignores any fluctuations in the asset’s price over time. You invest the same dollar amount on the same schedule no matter what, rather than trying to time your purchase for when the asset is “on sale.” This releases you from the stress of trying to time the market.

How dollar-cost averaging works

Let’s say you started a new job in June and determine you can invest $250 per month starting in July. You decide to try dollar-cost averaging, investing the same amount into the same asset each month.

The number of shares you purchase might change from month to month as the price changes, but it will average out over time. That’s because you’re purchasing the same dollar amount at regular intervals, so you don’t have to worry about timing—and since you make a purchase of the same dollar amount each time, you purchase fewer shares when prices are high and more shares when they’re low, lowering the average price over time.

Over the last six months of 2025, here’s how your monthly $250 investment might affect your average share price:

By investing $1,500 using dollar-cost averaging over a six-month time period, you’ve paid an average of $9.06 per share and purchased a total of 165.56 shares. Compare that to investing $1,500 all at once in July, when the share price was $10 per share. You would have only 150 shares and would have spent almost a dollar more per share.

Benefits of dollar-cost averaging

This strategy gives normal people a no-muss-no-fuss method of taking advantage of all the good investment mojo Warren Buffett is banging on about without having to get a degree in finance. Specifically, it offers these benefits to retirement investors, noobs, and anyone else who doesn’t feel a thrill when cracking open a fresh new prospectus:

It lowers your investment risk. Consistent smaller investments reduce your risk of making a hefty investment when the market (or the specific asset) is at its peak. And since this strategy lowers the average cost of each share you purchase, using dollar-cost averaging lowers your overall investing risk.

It eliminates emotional investing. Emotions tend to lead us astray in financial decisions, and that’s especially true when it comes to investing. Dollar-cost averaging helps you avoid the emotional investment roller coaster. Rather than buying when you’re feeling irrationally exuberant or selling because you’re afraid there will be no tomorrow, you invest on a schedule.

It makes investing more accessible. Unless you were born with an emerald spoon in your mouth, it’s unlikely that you have thousands of dollars sitting around to invest. Dollar-cost averaging not only helps smooth out the effects of market fluctuations and timing but it also makes investing possible and accessible for those of us who don’t have a lump sum to invest from the beginning.

Know the downsides

There are some potential drawbacks to the dollar-cost averaging strategy, although I’m convinced the benefits outweigh them.

Specifically, dollar-cost averaging does not negate the need to do your research. Consistently investing in a failing asset will not mitigate the risk of losing your money. Before you start using the dollar-cost averaging strategy, take the time to research and identify investments that align with your goals, risk tolerance, and time horizon.

The other potential downside to remember is that the market tends to rise over time, so even with dollar-cost averaging, you’ll probably spend more money per share in your 10th year of investing than you did during your first. But this is a minor problem, since the alternative is to invest a lump sum, which most people can’t afford to do.

Slow and steady

Dollar-cost averaging not only helps investors build a kind of rational investing discipline, but it also mitigates the risk of volatility and timing while making the practice of investing more accessible.

Building a consistent investing habit may sound less sexy than jumping on a hot stock tip that makes millions overnight, but it’s a proven strategy that will treat you right. What more can you ask for?

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