What is Dollar Cost Averaging (DCA)?

And is it a good way to buy stocks?

[THREAD]

DCA is just a fancy way to say "Keep buying consistently"

If you invest consistently, you'll buy more shares when the stock price is low, & fewer shares when the stock price is high

Real Life Example:

You set up your brokerage to auto-invest $100/mo in $STOR, a popular REIT

Jan '20- $37.30 = 2.7 shares
Feb '20- $39.25 = 2.6
Mar '20- $33.05 = 3.0
Apr '20- $16.98 = 5.9
May '20- $19.16 = 5.2
Jun '20- $19.36 = 5.1
Jul '20- $23.96 = 4.1
Aug '20- $23.60 = 4.2
Sep '20- $26.78 = 3.7
Oct '20- $27.59 = 3.6
Nov '20- $25.95 = 3.8
Dec '20- $33.00 = 3.0

In February 2020 when $STOR was $39.25, your $100 investment bought 𝟐.𝟔 𝐬𝐡𝐚𝐫𝐞𝐬

In May 2020 when $STOR was $19.16, your $100 investment bought 𝟓.𝟐 𝐬𝐡𝐚𝐫𝐞𝐬

Your $STOR Average Cost is $27.17

Dollar Cost Averaging evens out the ups and downs of day to day prices

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