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The Power of Dollar-Cost Averaging: Does It Still Work in 2025?
Yes, it still does work to build wealth steadily over time
In the world of investing, few strategies are as simple, and as debated, as dollar-cost averaging (DCA). The idea has helped everyday investors build wealth steadily over time. But as we move through 2025, with inflation concerns, market volatility, and changing tech landscapes, many are asking: Does dollar-cost averaging still work? The short answer is yes, but with important caveats. Let’s dive into the details.
What Is Dollar-Cost Averaging (DCA)?
Dollar-cost averaging is when you invest a fixed amount of money on a regular schedule, no matter what’s happening in the market. For example, you might invest $200 into an index fund on the 1st of every month. Sometimes you’ll buy shares when prices are high, other times when they’re low. Over time, this helps smooth out the price you pay per share.
Think of it like buying groceries each week. Some weeks, apples are expensive. Other weeks, they’re on sale. But if you keep buying a fixed amount of apples every week, the average price you pay stays reasonable.
Why Has DCA Been Popular for So Long?
- Takes emotion out of investing
People often get scared when the market drops or greedy when it rises. DCA sets a system that keeps your emotions from messing with your investment plan. - Works well with paychecks
Most people get paid biweekly or monthly. DCA fits naturally with that cycle — set it and forget it. - Builds discipline
Regular investing makes it a habit, just like brushing your teeth. It keeps you in the game.
What’s Different About 2025?
The market in 2025 looks a lot different than it did 10 or even 5 years ago. A few things stand out:
- Higher interest rates: After years of near-zero rates, central banks have pushed rates higher to fight inflation. This affects bond yields, mortgage rates, and stock valuations.
- Volatile tech sector: AI and green energy stocks have been rising fast — but also falling just as fast. Timing the market in this environment is extremely tough.
