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Updated 2mo ago.
Updated 2mo ago.
Dollar-Cost Averaging (DCA) is the strategy of investing a fixed amount at regular intervals, regardless of the market price. This approach smooths out the average purchase cost and eliminates the stress of market timing.
You invest $500 per month in XEQT.TO:
Average cost: $24.39 per unit (vs $24.67 if you had bought the same number of units each month). You automatically bought more units when the price was low.
Most Canadian online brokers (Wealthsimple, Questrade, Disnat) let you set up automatic recurring purchases, making DCA entirely passive.
DCA is the ideal strategy for beginner investors. It eliminates the temptation to "time the market" (which fails most of the time) and turns investing into an automatic habit. Combined with a TFSA and an all-in-one ETF like VEQT.TO, it is the simplest and most effective strategy for building wealth.