Investing every month is far more powerful than you think. Let's analyze this article together: Why is DCA the key to successful investing?
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⚠️ This article is not investment advice. Investing involves the risk of losing money. I am not responsible for your investments.
Introduction
Investing in the stock market is relatively simple. The most difficult part, however, is to continue investing when markets are falling, when the news is frightening, or when it seems that stocks have become too expensive..
It is precisely for this reason that a strategy as simple as DCA, Dollar Cost Averaging, can be particularly interesting.
The principle is very simple:
- Rather than trying to find the best time to invest, a fixed sum is invested at regular intervals.
For example, 500 CHF each month in the same diversified ETF, regardless of market conditions.
Therefore, we avoid having to answer the question that wastes a lot of time and money for investors: «"Is now the right time to invest?"»
DCA discipline is key
When a person starts to take an interest in the stock market, they often think they need to find the best companies.
Thus, it is looking for the next Nvidia, the next Apple or the next stock that could make +100 % in 1 year.
This is the principle of stock-picking: individually selecting companies in the hope that they will outperform the market.
On paper, the idea is appealing. In reality… it is extremely difficult and dangerous.
It should be noted that this problem is not limited to individual investors. Professionals themselves have great difficulty consistently outperforming their benchmark index over time.
S&P Dow Jones Indices' SPIVA studies have been tracking the performance of active funds relative to their benchmark indices (e.g., the S&P 500) for years.
Recent figures are particularly telling:
- In Europe, by 2025, a majority of active equity funds underperformed their index in 18 of the 21 categories studied.
- In the United States, the situation is similar. Analyzing the period 2010-2025, only 111 TP3T actively managed funds outperformed a single S&P500 ETF.
This obviously doesn't mean that no one can beat the market. There are exceptional investors who can.
But these are rare exceptions…
In truth: It is extremely difficult to know in advance who will be able to beat a US stock market index. Even for finance professionals.
And that's where the simplicity of DCA becomes interesting.
DCA: The art of behaving like a passive investor
Let's say you decide to invest 500 CHF each month in a diversified ETF. Let's assume you schedule your automatic transfer for the 5th of each month.
Afterwards…
- The stock market is rising? You invest the same amount every month.
- The stock market is down 20%? You invest the same amount every month.
- An economic crisis breaks out? You invest the same amount every month.
- The media are reporting that« the stock market could fall by another 30%. »"? It doesn't matter! You invest the same amount every month
That's precisely what makes the strategy interesting.
DCA transforms investment into habit rather than an emotional decision.
And that's probably one of its biggest advantages. Because the investor's main enemy isn't necessarily volatility. It's often their own behavior.
DCA helps to eliminate a large part of this problem.
DCA against "« wait for the crash »
This is probably one of the most common mistakes made by investors.
An investor looks at the market and thinks:
" The stocks are too expensive. I'm going to wait for a correction. »
The market rises by 10 % -> He waits.
Then the market rises by an additional 10 % -> It is still waiting.
Then the market finally corrects by 8 %.
He said to himself:
" There you go, I was right. It will probably continue to fall. I'm still waiting. »
He waits, then… -> the market rises by 20 %.
In truth, the market has risen by 32%, and… he still hasn't invested.
That's the problem with trying to invest.”at the right time”We are missing out on growth opportunities.
DCA also helps us fight against our emotions
The stock market largely functions as a machine for testing our psychology.
When everything is going well, we become euphoric. When everything is going badly, we become pessimistic.
And when we are pessimistic, we tend to make the wrong decisions.
DCA allows us to create a rule that does not depend on our mood.
" On the 5th of each month, I invest €500, without looking at the state of the stock market. »
Point.
- No need to watch CNBC.
- There's no need to read 15 articles about the next recession.
- No need to anticipate whether the S&P 500 will lose 10 % or gain 10 %.
The order is sent automatically every month and then you forget about it.
This simplicity can be extremely powerful.
The Morningstar study
Morningstar's research shows how much investor behavior can impact actual performance.
In his study Mind the Gap 2026, Morningstar indicates that the average investment in US equity funds and ETFs has yielded 8.7 % per year over the past ten years, compared to 9.9 % for the total return of funds.
That is, investors who invested at the beginning of each month earned an average of 9.9% per year, while those who tried to time their buys and sells only obtained an average of 8.7% per year.
The 1.2 point per year gap is attributed in particular to the timing and scale of investors' purchases and sales.
In other words, even when the investment product performs well, The investor may achieve lower performance simply because they are trying to beat the market timing.
Schwab's study
Schwab envisioned several investors who receive 2,000 $s each year for 20 years, from 2005 to 2024, and who invest in the S&P 500.
He simulated 3 investor profiles:
- Peter Perfect voluntarily waits for lowest point of the year to invest his 2,000 $. He knows the best day to buy (in reality, nobody knows that day, it's just an example). In other words, he benefits from a perfect timing.
- Ashley Action simply invests $2,000 USD once at the beginning of the year, without trying to predict the market.
- Matthew Monthly invests USD 166.66 each month, in DCA (USD 2,000 per year in total).
This is precisely where the study becomes interesting: Even with perfect timing, the difference isn't as dramatic as one might imagine..
Between Peter, Asthley and Matthew, the difference is only… $20,000 USD over 20 years.
Note that we have assumed that Peter knows in advance what the best day is to invest each year, which is obviously not possible.
Therefore, dollar-cost averaging (DCA) is a strategy almost as profitable as investing on the best day of the year. And nobody knows what that day is!
Schwab's complete study on market timing
Discipline matters more than motivation.
This is probably the most important conclusion. When starting out in the stock market, people often look for:
«"What is the best course of action?"»
Then :
«"Which is the best ETF?"»
Then :
«"When should I buy?"»
On this site, I have repeated it several times: If you're a beginner in the stock market, buy shares of a VOO ETF (S&P 500) every month and let your money grow. Don't worry about the market.
In my opinion (not investment advice), doing dollar-cost averaging (DCA) every month on a simple S&P500 ETF with a very low TER is one of the best possible long-term investment options.
It takes two minutes a month and you don't have to be a genius to do it.
Conclusion: Invest regularly rather than looking for the perfect moment.
DCA is not magic.
It does not prevent crashes. It guarantees no return.
And if you already have a significant amount of capital to invest immediately, historical data even shows that a one-time investment may have a better chance of winning out over a dollar-cost averaging strategy.
But for someone who receives a regular salary and wants to build their wealth gradually, the principle is extremely powerful.
Each month, invest in a good diversified ETF (such as the S&P 500)
- When markets are rising, keep buying.
- When markets fall, keep buying.
It doesn't matter what is said in the media or in family discussions.
The real advantage of DCA is therefore not in predicting the future.
It is precisely about not needing to predict it.
In conclusion: Don't try to be smarter than the market, but stay disciplined and invest monthly in your favorite ETF over the long term, so that compound interest can do its work.
Why is DCA the key to successful investing?
FAQ: Investing in DCA within an ETF
What is DCA in the stock market?
DCA, or Dollar Cost Averaging, This strategy involves regularly investing a fixed sum in the stock market, for example, monthly, rather than investing all of one's capital at once. This allows one to invest at different market levels without trying to anticipate price fluctuations.
Why do DCA in an ETF?
Dollar-cost averaging (DCA) in an ETF allows you to combine two advantages: the regularity of your investments and the diversification offered by the ETF. By investing monthly, you buy more shares when prices fall and fewer when prices rise, without needing to determine the best time to invest.
Is DCA profitable in the long term?
Dollar-cost averaging (DCA) can be an effective long-term investing strategy, especially when contributions are gradually drawn from monthly income. Its main strength lies in promoting regularity and reducing reliance on market timing for investment decisions. However, profitability depends on the ETF's performance and is never guaranteed.
Is it better to invest every month or all at once?
This depends in particular on the investor's situation. When capital is already available, investing immediately has historically offered better returns, as the money is exposed to the market for a longer period. Conversely, investing monthly is particularly natural when savings are built up gradually from salary.
How much should I invest in DCA each month?
There's no single, universal amount for dollar-cost averaging (DCA). Ideally, you should choose a sum that fits within your income, budget, and emergency savings. Even a relatively small amount, invested regularly over several years, can gradually build capital through compound interest.
Which ETF should I choose for DCA trading?
For a long-term DCA strategy, many investors prefer broadly diversified ETFs, such as those that replicate a major global index or the S&P 500. However, the choice depends on your objectives, investment horizon, risk tolerance, fees, and desired diversification.
Does DCA help avoid losses in the stock market?
No. Dollar-cost averaging (DCA) does not protect against market downturns and does not guarantee any returns. Its main benefit is to reduce the risk of poor timing and maintain investment discipline. With a long-term investment horizon, the goal is to maintain consistent market exposure rather than trying to predict every rise and fall.
Why is DCA the key to successful investing?
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