Dollar-Cost Averaging: An Investigation

Dollar-cost Averaging (DCA) is a common and useful systematic investment strategy for mutual fund managers, private investors, financial analysts and retirement planners. The issue of performance effectiveness of DCA is greatly controversial among academics and professionals. As a popularly recommended investment strategy, DCA is recognized as a risk reduction strategy; however, the advantage was claimed as the expense of generating higher returns. The dissertation is to intensively investigate the performances of DCA in light of the literatures comprehensively researched by previous thinkers. Using Monte Carlo simulation, the reviewed outcomes are confirmed by scientifically tests that DCA strategy is superior to reduce risk, but it is inferior to LS strategy in terms of effectiveness to produce returns. Although providing outperformances by investing in less volatile assets, it is more suitable to be applied for more risky investments in comparison with LS