Glossary
What is dollar-cost averaging?
Updated Reviewed quarterly
Dollar-cost averaging (DCA) is the practice of investing a fixed dollar amount on a regular schedule (e.g. NZ$200 every payday) regardless of market conditions. Because the fixed dollar buys more units when prices are low and fewer when prices are high, the average cost per unit tends to be lower than buying random lumps at random times. DCA is the default approach for KiwiSaver and most regular-investment plans.
How DCA works mechanically. Set up a regular automatic investment (weekly, fortnightly, monthly). Each cycle, the same dollar amount buys whatever the current unit price gets you. When the market dips, your fixed dollar buys more units. When the market is expensive, you buy fewer. Over time, your average cost per unit ends up below the simple arithmetic mean of unit prices over the same period — that's the mathematical "magic" of DCA.
What DCA is not. DCA is not a market-timing strategy or a way to get higher returns than lump-sum investing. On average, lump-sum investing beats DCA over long horizons — because markets rise more often than they fall, putting money to work earlier captures more return. The real value of DCA is behavioural: it removes the temptation to wait for a "better entry point" and makes investing a habit.
NZ platforms for DCA. Sharesies, Hatch, InvestNow, Kernel direct, Tiger and the major NZ brokers all support regular-investment plans. Sharesies offers optional subscription plans (from NZ$3/month) that reduce brokerage for higher-volume DCA. InvestNow charges zero commission on Smartshares ETFs — making it especially efficient for regular DCA into NZ-PIE funds. Kernel direct has zero ticket fee on Kernel funds with NZ$100 minimum to open.
Brokerage and DCA. The biggest enemy of DCA is per-trade brokerage. If you invest NZ$100 a week with a NZ$10 brokerage per trade, you lose 10% of every contribution to fees — catastrophic for compounding. Sharesies' 1.9% rate (capped per market: NZ$25 / AU$15 / US$5) is fine at meaningful trade sizes but becomes inefficient on sub-NZ$50 contributions. For weekly micro-investing, zero-commission platforms like InvestNow (Smartshares) or Kernel direct (Kernel funds) are typically the right home.
KiwiSaver IS dollar-cost averaging. Every paycheck contribution to KiwiSaver buys fund units at the prevailing unit price — that's DCA by default. Most NZ investors are already DCA-ing through KiwiSaver without thinking of it that way.
Where you'll see this term
