TL;DR Dollar-cost averaging (DCA) is investing the same amount at regular intervals — say $200 every month — no matter what the market is doing. You automatically buy more shares when prices are low, fewer when high, and skip the impossible game of timing.
The plain-English version
Instead of asking "is now a good time to invest?" (nobody knows, including the people on TV), DCA answers with a schedule. $200 on the 1st of every month, forever, rain or shine.
The arithmetic quietly works in your favor. Say you invest $200 monthly: at $50/share you buy 4 shares; the market dips and at $40 you buy 5; it runs and at $80 you buy 2.5. Your dollars automatically stretch further at lows and buy less at highs — a discipline no human mood can match. Anyone with a 401(k) contribution is already doing this without the vocabulary.
The honest fine print
Mathematically, if you have a lump sum sitting in cash, investing it all at once has historically beaten drip-feeding it in most periods — markets rise more often than they fall, so delays cost on average. So why does everyone still preach DCA? Because most people don't have lump sums (they have paychecks — DCA is simply how income works), and because the math assumes a robot. Humans panic. The person who DCAs through a crash typically beats the person who lump-summed, panicked at −30%, and sold. The best strategy is the one you'll actually keep doing during the worst month.
Where it shines and where it doesn't
DCA into broad index funds is the classic pairing: diversified thing, boring schedule, decades of runway. DCA into a single collapsing stock is a different activity — "averaging down" on one company isn't a strategy, it's a conviction bet repeated. The autopilot deserves a plane worth flying.
The common mistake
Stopping the schedule because the market fell. Red months are the mechanism — that's when the fixed amount buys the most. Turning off DCA in a crash is canceling the discount at the exact moment it applies.
Educational only — not investment advice. DCA doesn't beat the market; it beats the version of you that tries to.