What is Dollar Cost Averaging? Complete Guide for 2026

Dollar cost averaging (DCA) is simple: you invest a fixed amount every month, no matter what the market is doing. When prices are low, your money buys more shares. When prices are high, it buys fewer. Over time, you end up with a good average price without ever having to guess where the market is headed.

For European investors, monthly investing in EUR also smooths out exchange rate fluctuations. You're not just averaging stock prices, you're averaging the EUR/USD rate too.

How It Works

1. Pick an amount. Whatever you can afford each month. EUR 100, EUR 500, EUR 2,000. The amount doesn't change the math.
2. Pick your assets. A mix of stocks, bonds, and whatever else fits your risk tolerance.
3. Set up a monthly transfer. Most brokers let you automate this. Same day each month, same amount, no thinking required.
4. Leave it alone. Don't check it every day. Don't sell when it drops. The whole point is that you don't make decisions.

A Real Example: EUR 500/Month into the S&P 500

Here's what actually happened if you invested EUR 500 every month into the S&P 500 for 20 years, using real price data from our calculator:

EUR 120,000 in, roughly EUR 461,187 out in real terms. But along the way, the index dropped -46.8% during 2008-2009 and there were months where your portfolio was worth 36% less than what you had invested. That's the deal with DCA: it works, but you have to sit through some ugly stretches.

Why It Works

You don't have to time anything

Nobody can consistently predict market tops and bottoms. Not hedge funds, not analysts, not your uncle who "called" the 2008 crash. By investing every month, you buy at every price level and end up with the average. It's boring, and it works.

It takes emotions out of the equation

People buy when everything feels great (prices are high) and sell when they're scared (prices are low). That's the opposite of what makes money. With DCA, your investment goes in on the same day every month whether the market crashed last week or hit a record high. You don't have to fight your instincts because there's no decision to make.

Drops actually help you

This is the part that's hard to internalize. When the market drops 30%, your monthly investment buys a lot more shares at those lower prices. When the market recovers, those cheap shares are now worth much more. The bumpier the ride, the more you benefit from buying at temporarily low prices.

The Good Parts

• You never have to think about whether "now is a good time to invest."
• It works with any income level. EUR 100/month follows the same math as EUR 10,000/month.
• You automatically buy at many different prices across years and market cycles.
• 20+ years of data across every major stock market shows it works.

Who Should Use DCA?

Pretty much everyone who earns a salary and wants to build wealth over 10+ years.

Try It Yourself

Our free calculator lets you test any portfolio mix across 10 asset classes using real EUR price data since 2006. Pick your assets, set your allocation, and see exactly what would have happened through the 2008 crash, the 2020 pandemic, and the 2022 rate hikes.

Not sure what to invest in? Read our EUR investor guide. New to investing in Europe? See the EUR investor guide or how to invest EUR 500 per month.

Frequently Asked Questions