What is the primary benefit of dollar-cost averaging?

The primary benefit of dollar-cost averaging is that it helps reduce the impact of market volatility on an investor's portfolio. When an investor uses dollar-cost averaging, they invest a fixed amount of money at regular intervals regardless of the asset's price. This strategy means that when prices are low, the investor can purchase more shares, and when prices are high, fewer shares are bought. As a result, over time, this approach can lead to a lower average cost per share.

By spreading out investments over time, dollar-cost averaging helps mitigate the risk associated with market fluctuations because it avoids the pitfalls of trying to time the market, which can be challenging and risky. This systematic investment strategy is particularly beneficial in volatile markets where prices can swing significantly within short periods. Therefore, this technique encourages disciplined investing, which can lead to more stable investment performance over the long term.