What is dollar-cost averaging and why do investors use it?

Dollar-cost averaging is an investment strategy where you invest a fixed dollar amount at regular intervals, such as monthly, regardless of the asset's price. When prices are high, your fixed amount buys fewer shares; when prices are low, it buys more shares. Over time, this tends to produce a lower average cost per share than if you had invested a lump sum at a single point in time. Investors use it primarily to reduce the impact of market volatility and eliminate the pressure of trying to time the market. It also removes emotional decision-making, since the purchases happen automatically on a schedule. It's especially popular with retirement accounts like 401(k)s, where contributions are made consistently from each paycheck.