A Note on the Suboptimality of Dollar-Cost Averaging as an Investment Policy

George Constantinides

Journal of Financial and Quantitative Analysis, 1979, vol. 14, issue 2, 443-450

Abstract: The widespread notion that dollar-cost averaging can help an investor minimize the risk of investing all of one's capital in the market at an inappropriate time is aptly stated by Malkiel [4, p. 242]:Periodic investments of equal dollar amounts in common stocks can substantially reduce (but not avoid) the risks of equity investment by insuring that the entire portfolio of stocks will not be purchased at temporarily inflated prices. The investor who makes equal dollar investments will buy fewer shares when prices are high and more shares when prices are low.

Date: 1979
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