Dollar-Cost Averaging Frequency: Daily, Weekly or Monthly?

    We all know the importance of dollar-cost averaging especially for retail investors investing in passive investment vehicles like index funds. However, it begs the question – how frequently should you do it?

    One of the benefits of dollar-cost averaging (DCA) is that you can take advantage of lower prices, and get a better average cost on your investments. If you are unsure what dollar-cost averaging frequency you should use you have come to the right place.

    In this article, we will go over the different frequencies you can use to improve your dollar-cost average strategy, and their advantages and disadvantages.

    Is it better to invest daily weekly or monthly?

    It all depends on the time you want to dedicate to investing, and to implementing your dollar-cost averaging strategy. Dollar-cost averaging can work either weekly or monthly. However, one of its main benefits is that investors can take advantage of price declines, and this means that you should keep an eye on stock prices daily.

    You do not have to check stock prices every hour of the day, but just make sure you check how the market is trading, and whether it makes sense to make an investment that day.

    Ideally one of the best ways to do dollar-cost averaging is to set a monthly or weekly date. This way you can keep track of your returns, and add to your positions accordingly. It also allows you to keep your personal finances in check during that period.

    Does dollar-cost averaging work weekly?

    Yes, dollar-cost averaging works weekly. However, you should keep in mind that if you are adding to your positions every week as opposed to one time a month it can increase your brokerage fees, depending on the broker you are using. 

    Is dollar-cost averaging better daily or weekly?

    There is no significant difference apart from the transaction fees your broker might charge you. You should also keep in mind, that in order to take advantage of stock market declines a daily dollar-cost averaging frequency works best.

    Is it better to DCA weekly or monthly?

    It depends on the amount of time you want to dedicate to your investments, as well as if you are getting your salary weekly or monthly. Both approaches work, however, a weekly DCA frequency will most likely cost you more on broker fees.

    Dollar-cost averaging daily

    Dollar-cost averaging daily means that investors will add to their existing portfolio positions on a daily basis. This is certainly the best dollar-cost averaging frequency since you can take advantage of lower prices, and certainly get the lowest average investment cost.

    Dollar-cost averaging daily has great advantages, including the fact that you can easily keep up with prices, and take advantage of significant declines. If you are looking to get the lowest average cost on your investments this is certainly the right dollar-cost averaging frequency.

    Despite that, some people might not have the time or inclination to buy stocks every day. Therefore, it might not be the best option for those investors. 

    You should also consider that a daily dollar-cost averaging frequency will make incur more broker fees since you are making more transactions. Unless you use a broker like Robinhood who does not charge any fees.

    Dollar-cost averaging weekly

    Dollar-cost averaging weekly means you will an investment every week of a set amount. This is the perfect solution for those investors who receive their salaries weekly. You can also do it bi-weekly, which can also work.

    The advantage over daily dollar-cost averaging frequency is that you are not forced to invest every day, while at the same time you can keep up with price changes. 

    Compared to monthly, a weekly approach allows you to be more on top of the trading prices of your positions, which could help to get a lower average cost.

    Dollar-cost averaging monthly

    Dollar-cost averaging monthly seems to be one of the most popular options. Especially for investors who like to have their portfolio on autopilot. It does not take too much time, or effort, and allows you to put your investments in the back of your mind. This is also one of the best solutions if you are getting most of your income on a monthly basis.

    It also allows you to save on broker fees. The great disadvantage you have with this dollar-cost averaging frequency is that you might miss some price declines that you could take advantage of. Keep that in mind.

    Conclusion

    There are clear differences in the different dollar-cost averaging frequencies. You should carefully analyze what is in fact the best solution for your strategy over the long term. Remember that even if you can get a slightly lower price on occasion, it does not necessarily translate into much higher returns. 

    The best approach is to choose one of these options:

    • Bi-weekly 
    • Weekly
    • Bi-monthly 
    • Monthly 

    While at the same time checking the markets daily to take advantage of any dips. It would be wise to avoid a daily dollar-cost averaging since it will put more pressure on a daily task you need to complete, and might push investors to even trade over the short-term, which does not fulfill the purpose of dollar-cost averaging.

    Image source: Time

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