Quite a number of studies have appeared in academic literature on the subject of dollar-cost averaging when buying securities.
There is some evidence against the use of that strategy. Nevertheless dollar-cost averaging continues to be used by investors and is recommended by most financial advisers.
Besides its psychological appeal, the popularity of dollar-cost averaging comes from examples that show its use results in greater stock holdings across the stock market cycle, compared to a one-time, lump-sum investment.
The question whether it ought to be employed depends on the volatility of the markets. If the market for a security being bought is trending up, dollar-cost averaging can prove more costly. If the market will tend to be volatile, or erratic, such buying procedure will be more lower-cost.
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