Cost averaging (DCA)

If you regularly invest a fixed amount, for example through a savings planGlossarySavings plan (Bitcoin savings plan)Automatically buying bitcoin at fixed intervals with a fixed amount, for example $50 a month. A savings plan takes the question of the right moment off your hands, but doesn’t promise a higher return.On the learning path: Stage 4 · Step 4 – Setting up a savings plan →In the glossary →×, you get more bitcoin when the price is low and less when it’s high. So your average cost is never above the average of the prices on your purchase dates – and as soon as the price fluctuates, it’s below it.

Example

$100 a month for three months (example prices):

Month	Price	Bought
1	$50,000	0.002 BTC
2	$25,000	0.004 BTC
3	$50,000	0.002 BTC

For $300 you get 0.008 BTC – an average cost of $37,500. The average of the three prices is around $41,667.

No extra return

The effect compares with buying a fixed quantity on each date, not with investing everything straight away. In the example, the lump sum would have bought 0.006 BTC – less. But if the price rises to $75,000 and $100,000 in months 2 and 3, the savings plan buys only around 0.0043 BTC, while the lump sum still gets 0.006 BTC. Because markets have mostly risen over the long term, a Vanguard analysis (several markets, 1976–2022, three monthly instalments, measured after one year) found the lump sum ahead in 62% to 74% of cases, depending on the market.^[1]

Why it’s still useful

Instalments take the timing decision off your hands and soften the blow of a crash shortly after you buy. Vanguard sees this as a better fit for particularly loss-averse investors – but spread over a short period, such as three months.^[1] If you save out of your ongoing income, you don’t have a lump sum anyway. For a look back at bitcoin, see Savings plan or lump sum?.