[Disclaimer: These are my own views, not financial advice. Use at your own risk.]

Anyone can be a Wall Street Trader and apply the best advice around: buy low!

By taking a fixed amount each month and investing in the asset allocation strategy from Part 3: Asset Allocation, we’re implementing a process called dollar-cost averaging (DCA). It’s another financial autopilot mechanism I use to keep me from second-guessing my decisions – especially when:

• the market is up
• the market is down
• there seems to be a better stock

Sticking to my plan, I take uninvested cash and move toward my target stock ratio. If an investment is down, I’m buying cheaper. If it’s up, I’m naturally buying less of it.

And the math?

Most DCA examples compare it to investing a lump sum at the start of a sample period. For example, a year ago VTI was about $220 per share, so a $1,200 upfront investment would have bought you about 5.45 shares. In contrast, putting in $100 per month would have resulted in an average price of about $236.22, netting only about 5.08 shares at year’s end.

But real life rarely works this way – most people need time to save up that $1,200 before investing. If you invested a lump sum at the end of the year at $265/share, you’d only buy about 4.53 shares. That’s a direct result of the core assumption from Part 2: Thinking Long Term the market goes up over the long-term (hopefully).

The difference? With DCA ($100/month), your final portfolio is worth $1,346 versus $1,200 invested at the year-end price. That’s an extra $146 gained by investing gradually instead of all at once at the end.

I want to reiterate that in most long-term scenarios I’ve examined, investing a lump sum at the beginning of the period has historically outperformed dollar-cost averaging – primarily because more money is working in the market for a longer time. However, DCA remains especially valuable for investors who are saving gradually throughout the year or prefer smoother entry points to manage market uncertainty and avoid emotional pitfalls.

For me, the real takeaway from DCA is that it builds the habit of consistent investing and takes emotion out of the process. Data show that investing smaller amounts more often generally yields better outcomes – if the comparison is to lump sum at the end, not the beginning, of the period. Most importantly, regular investing means you’re sure to participate in some market dips by buying more when markets are down.

So how do you buy low? Buy early, buy often, and keep it On Rails!

Good luck!

-Gary

Some helpful resources:

• Charles Schwab: What is Dollar-Cost Averaging? https://www.schwab.com/learn/story/what-is-dollar-cost-averaging