What Is Dollar-Cost Averaging (DCA)?

DCA means investing a fixed amount regularly (monthly) regardless of market conditions. Investing $500/month for 20 years at 7% annual return = $290,000+ portfolio. DCA removes emotion from investing and ensures you buy more shares when prices are low and fewer when prices are high.

DCA vs Lump Sum Investing

Investing $100,000 all at once has higher average returns (~6%) but higher risk of buying at market peaks. DCA over 10 years ($10,000/month) removes timing risk and historically slightly underperforms lump-sum (by ~1-2%) but provides peace of mind and lower stress.

Canadian DCA Best Practices

• Automate with bank pre-authorized debits (remove temptation to skip)
• Use TFSA for tax-free growth (max $7,000/year contribution for 2026)
• Choose low-cost ETFs (0.1-0.4% MER) over mutual funds (0.8-2%)
• Rebalance annually to maintain target asset allocation