Dollar-cost averaging happens when you invest regular, small amounts of money in an asset (stock or bond), rather than putting in a large lump sum. As the asset price fluctuates, your regular contribution buys different amounts of the asset.
The chart below shows how unit values move up and down over two years. Let’s assume an investor contributes $100 per month for two years. Take a look at the numbers to see how dollar-cost averaging evens out the highs and lows of investing in the market.