Dollar-cost averaging is an investment strategy that involves investing a fixed amount of money at regular intervals, regardless of the current market conditions. This approach allows investors to take advantage of market fluctuations by buying more shares when prices are low and fewer shares when prices are high.

One of the main benefits of dollar-cost averaging is that it eliminates the need for timing the market. Instead, investors can focus on their long-term investment goals and let time work in their favor. By investing consistently over time, investors can reduce the impact of short-term volatility and potentially earn higher returns over the long run.

Another benefit of dollar-cost averaging is that it helps investors avoid emotional decisions based on fear or greed. When markets are volatile, many investors panic and sell their investments at a loss or buy more when prices are high out of FOMO (fear-of-missing-out). Dollar-cost averaging helps to remove these emotions from investing by providing a disciplined and systematic approach.

However, there are some downsides to this strategy. For instance, dollar-cost averaging may not be suitable for those who have large sums of money to invest at once or those who have limited investment options with high fees or commissions.

In conclusion, dollar-cost averaging can be an effective way for investors to build wealth over time while reducing risk through consistent contributions. However, like any investment strategy, it’s essential to consider your individual circumstances before deciding if this approach is right for you.