Dollar-cost averaging may be especially useful to beginning investors who don’t yet have the experience or expertise to judge the most opportune moments to buy.
It isn’t necessarily appropriate for those investing time periods when prices are trending steadily in one direction or the other. Be sure to consider your outlook for an investment plus the broader market when making the decision to use dollar-cost averaging.
Bear in mind that the repeated investing called for by dollar-cost averaging may result in higher transaction costs compared to investing a lump sum of money once.
If the price rises continuously, those using dollar-cost averaging end up buying fewer shares. If it declines continuously, they may continue buying when they should be on the sidelines
Using this strategy to buy an individual stock without researching a company’s details could prove detrimental, as well. That’s because an investor might continue to buy more stock when they otherwise would stop buying or exit the position.
avoid the risk that they will make counter-productive decisions out of greed or fear, such as buying more when prices are rising or panic-selling when prices decline
