Gallio Letter: Dollar-Cost Averaging
Invest the same amount on a regular schedule, remove the stress of timing, and let consistency do the work.
Dollar-Cost Averaging
Key Takeaways
- Investing a fixed amount on a regular schedule (€200 monthly, for example) removes the guesswork and emotional burden of timing the market.
- When prices drop, your fixed amount buys more shares; when prices rise, it buys fewer. This automatic rebalancing naturally favors lower costs over time.
- Consistency beats optimization. The strategy works because it’s simple enough to stick with through crashes, earning recoveries, and the noise in between.
The Mechanics
Dollar-cost averaging is straightforward. You pick an amount, say €200, and invest it every month like clockwork. No thinking required. No monitoring the news to catch the perfect moment.
Here’s what actually happens. When the market is expensive and prices are high, your €200 buys fewer shares. When prices drop, that same €200 buys more. Over long periods, your average cost per share naturally drifts toward the lower end of the range, simply because you’re buying more when things are cheap.
You also sidestep the timing trap entirely. Most investors worry about putting a lump sum in right before a crash. With dollar-cost averaging, you’re spread across hundreds of different entry points. One bad buy gets diluted by dozens of good ones.
Why It Actually Works
The real power isn’t mathematical; it’s psychological.
Deciding when to invest a large sum creates real stress. What if you put €10,000 in and the market drops 20% the next month? That anxiety keeps many people from investing at all. They sit on cash waiting for the perfect moment that never comes.
Dollar-cost averaging removes that decision entirely. You don’t invest based on feelings or headlines or your gut sense of where the market is headed. You invest on a schedule. Tuesday, the 15th, €200 goes in. Month after month. No regret, no second-guessing.
This builds a powerful habit too. Automatic investing is investing that actually happens. You set it up once and it just works. Money that leaves your account before you see it in your spending account is money you don’t miss. You adapt your life to what remains.
Lump Sum vs Dollar-Cost Averaging
Research says lump sum investing (putting all your money in immediately) beats dollar-cost averaging about two-thirds of the time. Markets trend up over the long run, so getting your money in sooner usually wins.
But that other third can be brutal. Imagine receiving an inheritance and deploying it all right before a major crash. The emotional weight of watching it drop 30% immediately is real. Most people panic sell at exactly the wrong time.
Dollar-cost averaging avoids that trauma. If you have a lump sum and the risk of full immediate investment makes you nervous, spread it over 6 to 12 months. You’ll probably give up some returns in exchange for peace of mind. That’s a fair trade if it keeps you invested.
The good news: if you’re investing from regular income anyway, this debate doesn’t matter to you. You’re already doing dollar-cost averaging by default. Your paycheck hits your account, and you invest from it regularly. That’s the whole system.
Making It Work
A few practical rules. Pick an amount you can sustain. €100 every month beats €300 sometimes. Reliability matters far more than size. Pick a schedule: monthly works fine, weekly works fine, whatever you’ll actually stick to.
When the market crashes, and it will, your instinct will be to pause. Resist that. Your €200 during a 30% drop buys way more shares than your €200 at the peak. When recovery comes, those extra shares multiply your gains dramatically. People who kept investing through 2008 and 2020 recovered faster and ended up wealthier than those who paused or panicked.
The whole point is to invest mechanically. No adjusting based on headlines or CNBC or what your uncle said about the economy. No tinker, no optimize, just invest. You can use Gallio to track these contributions against your actual goals, watching your regular investments compound over time without the temptation to fiddle.
The Crash Test
This is where dollar-cost averaging gets tested. When markets crash, it feels wrong to keep buying as prices fall. The media is screaming, your friends are panicking, and you’re supposed to keep investing?
Yes. Because your €200 during a crash buys way more shares. That’s the entire point. When recovery comes, those extra shares become extra gains.
Markets have crashed repeatedly over the past century. People who kept dollar-cost averaging through each one came out ahead of those who stopped. The 2008 financial crisis, the 2020 pandemic crash, every correction. The pattern holds.
The strategy only works if you don’t abandon it when things get scary.
Why This Works Better Than You’d Think
Dollar-cost averaging isn’t trying to maximize returns. It’s trying to maximize consistency. A boring, automatic system that you’ll actually stick to beats a mathematically optimal system that you’ll abandon when emotions run high.
This is why behavioral investing matters. The difference between getting great returns and getting mediocre ones often comes down to staying in the game versus bailing out. Dollar-cost averaging keeps you in.
Set up automatic transfers on payday. Use Gallio to watch your goal progress over months and years. See your portfolio grow. Focus on the rhythm of consistent investing rather than the daily noise of price movements.
The simplicity is the point. No decisions to make, no timing anxiety, no regret. Just steady growth from steady investing.
Gallio tracks your goal progress over months and years, so you can see your portfolio working for you. Focus on the rhythm, not the noise.
Dollar-Cost Averaging
Key Takeaways
- Investing a fixed amount on a regular schedule (€200 monthly, for example) removes the guesswork and emotional burden of timing the market.
- When prices drop, your fixed amount buys more shares; when prices rise, it buys fewer. This automatic rebalancing naturally favors lower costs over time.
- Consistency beats optimization. The strategy works because it’s simple enough to stick with through crashes, earning recoveries, and the noise in between.
The Mechanics
Dollar-cost averaging is straightforward. You pick an amount, say €200, and invest it every month like clockwork. No thinking required. No monitoring the news to catch the perfect moment.
Here’s what actually happens. When the market is expensive and prices are high, your €200 buys fewer shares. When prices drop, that same €200 buys more. Over long periods, your average cost per share naturally drifts toward the lower end of the range, simply because you’re buying more when things are cheap.
You also sidestep the timing trap entirely. Most investors worry about putting a lump sum in right before a crash. With dollar-cost averaging, you’re spread across hundreds of different entry points. One bad buy gets diluted by dozens of good ones.
Why It Actually Works
The real power isn’t mathematical; it’s psychological.
Deciding when to invest a large sum creates real stress. What if you put €10,000 in and the market drops 20% the next month? That anxiety keeps many people from investing at all. They sit on cash waiting for the perfect moment that never comes.
Dollar-cost averaging removes that decision entirely. You don’t invest based on feelings or headlines or your gut sense of where the market is headed. You invest on a schedule. Tuesday, the 15th, €200 goes in. Month after month. No regret, no second-guessing.
This builds a powerful habit too. Automatic investing is investing that actually happens. You set it up once and it just works. Money that leaves your account before you see it in your spending account is money you don’t miss. You adapt your life to what remains.
Lump Sum vs Dollar-Cost Averaging
Research says lump sum investing (putting all your money in immediately) beats dollar-cost averaging about two-thirds of the time. Markets trend up over the long run, so getting your money in sooner usually wins.
But that other third can be brutal. Imagine receiving an inheritance and deploying it all right before a major crash. The emotional weight of watching it drop 30% immediately is real. Most people panic sell at exactly the wrong time.
Dollar-cost averaging avoids that trauma. If you have a lump sum and the risk of full immediate investment makes you nervous, spread it over 6 to 12 months. You’ll probably give up some returns in exchange for peace of mind. That’s a fair trade if it keeps you invested.
The good news: if you’re investing from regular income anyway, this debate doesn’t matter to you. You’re already doing dollar-cost averaging by default. Your paycheck hits your account, and you invest from it regularly. That’s the whole system.
Making It Work
A few practical rules. Pick an amount you can sustain. €100 every month beats €300 sometimes. Reliability matters far more than size. Pick a schedule: monthly works fine, weekly works fine, whatever you’ll actually stick to.
When the market crashes, and it will, your instinct will be to pause. Resist that. Your €200 during a 30% drop buys way more shares than your €200 at the peak. When recovery comes, those extra shares multiply your gains dramatically. People who kept investing through 2008 and 2020 recovered faster and ended up wealthier than those who paused or panicked.
The whole point is to invest mechanically. No adjusting based on headlines or CNBC or what your uncle said about the economy. No tinker, no optimize, just invest. You can use Gallio to track these contributions against your actual goals, watching your regular investments compound over time without the temptation to fiddle.
The Crash Test
This is where dollar-cost averaging gets tested. When markets crash, it feels wrong to keep buying as prices fall. The media is screaming, your friends are panicking, and you’re supposed to keep investing?
Yes. Because your €200 during a crash buys way more shares. That’s the entire point. When recovery comes, those extra shares become extra gains.
Markets have crashed repeatedly over the past century. People who kept dollar-cost averaging through each one came out ahead of those who stopped. The 2008 financial crisis, the 2020 pandemic crash, every correction. The pattern holds.
The strategy only works if you don’t abandon it when things get scary.
Why This Works Better Than You’d Think
Dollar-cost averaging isn’t trying to maximize returns. It’s trying to maximize consistency. A boring, automatic system that you’ll actually stick to beats a mathematically optimal system that you’ll abandon when emotions run high.
This is why behavioral investing matters. The difference between getting great returns and getting mediocre ones often comes down to staying in the game versus bailing out. Dollar-cost averaging keeps you in.
Set up automatic transfers on payday. Use Gallio to watch your goal progress over months and years. See your portfolio grow. Focus on the rhythm of consistent investing rather than the daily noise of price movements.
The simplicity is the point. No decisions to make, no timing anxiety, no regret. Just steady growth from steady investing.
Gallio tracks your goal progress over months and years, so you can see your portfolio working for you. Focus on the rhythm, not the noise.