What is Dollar Cost Averaging — And Why I Use It for Every Stock I Own
Introduction
I used to hate investing a lump sum. You put in $500, and within a day the position is down 5%. It stings — not because you’ve necessarily made a bad decision, but because the timing just wasn’t right and now you’re starting in the red.
I figured there had to be a better way to do this.
I found it while listening to Market Call on BNN Bloomberg — a daily investment segment I still tune into. They talked about legging into a position a third at a time rather than going all in at once. The idea stuck with me. That principle — buying gradually over time rather than all at once — is the foundation of dollar cost averaging, and it’s now the core of how I invest.
This post breaks down what DCA actually is, how I use it in my own portfolio, and why I think it’s the single most practical strategy for anyone in their 20s trying to build wealth without losing their mind over market timing.
If you haven’t read how I structure my TFSA yet, start there — this post covers the account setup and portfolio breakdown that this strategy sits inside.
What is Dollar Cost Averaging?
Dollar cost averaging — DCA — is the practice of investing a fixed amount of money at regular intervals, regardless of what the market is doing. Instead of trying to pick the perfect moment to buy, you buy consistently over time.
The result is that sometimes you buy when prices are high, sometimes when they’re low, and your average cost per share ends up somewhere in the middle. You’re not trying to time the market — you’re removing timing from the equation entirely.
Here’s the simplest way I’ve heard it put, and I’ll borrow it from Warren Buffett: time in the market is always better than trying to time the market. There is no perfect moment. Stop looking for one. Just begin.
How I Actually Use DCA
Every payday I pay myself first — at least 10% of my pay goes straight into my investments before anything else gets touched. I covered that principle in depth in The Richest Man in Babylon post, but here’s how it works in practice within my portfolio.
I hold 10 stocks that I’m building up to a $2,000 book cost each. That gives every position a 10% weight in my portfolio — no single stock can dominate and no single stock can sink me. Once all 10 positions hit $2,000, I’ll build each to $3,000, then $4,000, using the same approach.
When I deposit my investing money each pay, I don’t just pick randomly. I look at which of my holdings is most down since my last contribution — the one sitting at the biggest loss or the weakest position — and I buy that one. I’m combining DCA with buying on dips. The two strategies work together: I’m investing consistently, and I’m pointing that money toward wherever I can get the best average cost.
If everything is green and up for the month, I take a bit more time. I’ll consider things like: which holding has the least book cost? Is there an earnings call coming up where I might get a better entry? Does one holding have a better dividend yield right now? There’s still thought behind it — but the framework removes the panic and the noise.
Real Examples From My Portfolio
Dollarama — Averaging Down
I bought my first Dollarama position when the stock hit its high of around $200. Almost immediately it pulled back to $170 and held there for a while. That’s a tough feeling — you buy at the top and watch it slide.
But instead of selling in frustration or doubling down all at once, I used DCA to slowly buy more at the lower price. Over time I brought my average cost down from $200 to around $180. The position isn’t back to even yet, but it’s significantly less underwater than it would have been if I’d just held my original purchase and done nothing. I’ve since filled the position to its $2,000 book cost at an average I’m comfortable with.
Constellation Software — Knowing When to Walk Away
Not every DCA story ends with holding forever. I bought Constellation Software at around $3,200 thinking I was getting a good entry on a dip. It continued dropping — all the way to $2,100. I kept buying to average down, eventually getting my cost to around $2,700. When the stock recovered to my average and I broke even, I sold.
It wasn’t the outcome I originally wanted, but DCA gave me the ability to recover from a bad entry. Without it, I’d have been sitting on a much larger loss with no clear path back. Sometimes the win is just getting out whole.
VCE — Averaging Up
DCA doesn’t only work on the way down. My VCE holding — which I use as a safe parking spot for cash when I’m not sure where to deploy it yet — has averaged up from around $50 to $58 over time through dividend reinvestments and additional purchases.
Compare that to putting $1,000 in at $50 and another $1,000 in at $75. Your average would be sitting in the mid-to-high $60s just because of that one higher purchase. By spreading it out gradually, my average stayed lower and my overall position is stronger for it.
The Oil Trade — And Getting Lucky
I want to be honest about the times things went brilliantly too. Over eight years of investing I’ve had a handful of trades where things really worked out — my oil holdings being the best example.
Athabasca Oil was the one I originally mentioned where I made 140% gains. Honest truth though: it was partly luck, and I was about two years late to the party. If I’d invested at the actual right time, I’d have been up closer to 1,400%. Even when you’re right, you’re usually not as right as you could have been — and that’s okay.
The more interesting story is Veren Oil and Whitecap. I held Veren and when the acquisition by Whitecap was announced, my position came up roughly 40% from where I’d been holding it. I’d also purchased Whitecap early at around $7 a share independently because I was already interested in the company. When the acquisition completed as a share-for-share takeover, my Veren shares converted into Whitecap shares — bringing my blended book cost down to roughly $6.50 post-acquisition.
Since then Whitecap has gone up over 100% further from that entry point. At $2,000 book cost I’m collecting roughly $18-20 in dividends every single month, with my average still sitting around $7.10. I let the dividends reinvest automatically and continue to add to Athabasca on pullbacks.
This is what patience, diversification within a sector, and not chasing hype looks like in practice. I wasn’t trying to time anything perfectly — I bought companies I believed in, averaged in over time, and let the position build.
What Happens When Everyone Chases the Hype
Earlier this year when gold went parabolic, almost everyone I know jumped in. They bought at the top when everyone was talking about it, and within a week the sell-off hit. Most were down 40% or more almost immediately.
The same story plays out with crypto every cycle. People put it all in at once at the highs — when it’s on the news, when their colleagues are talking about it, when FOMO is at its peak. Then it crashes and they either panic sell or hold through a brutal drawdown.
If they’d averaged in gradually over time — bought some, waited, bought more — they would have smoothed out that entry significantly. DCA won’t make you the most money if you pick the exact bottom. But it gives you a much better chance of a B+ outcome rather than a D or an F. And consistently getting B+ outcomes is how you build real wealth over time.
“But I Can’t Afford to Start”
One of the biggest misconceptions about DCA — and investing in general — is that you need a significant amount of money to get going.
You don’t. You can start with $10.
Many stocks and ETFs on platforms like Wealthsimple now allow fractional share purchases. You don’t need to buy a full share of a $200 stock — you can put $10 in and own a fraction of it. That $10 starts working for you immediately. It compounds. It grows.
$50 a pay is $100 a month. $100 a month is $1,200 a year. $1,200 a year over five years is $6,000 — before any market gains. And if the market averages its historical 7% annual return on top of that, the number grows considerably faster.
Start small. Learn as you go. Add more as you can. That’s the whole strategy.
DCA vs Timing the Market
Here’s the simplest way I can put it:
Trying to time the market perfectly is like trying to catch a falling knife. Sometimes you catch it by the handle. Usually you catch it by the blade.
DCA removes the knife entirely. You’re not trying to catch anything — you’re just showing up consistently, investing what you can, and letting time do the work.
In eight years of investing I’ve picked the perfect moment once. And even then I was two years late. The rest of the time, averaging in has served me far better than any attempt to be clever about timing.
Time in the market. Not timing the market. Every time.
The Bottom Line
Dollar cost averaging isn’t glamorous. It won’t give you a story about the time you bought at the exact bottom and made 10x your money overnight. What it will give you is a consistent, disciplined approach that removes emotion from your investing, protects you from your own worst impulses, and builds real wealth over time.
I use it for every stock I own. I’ve used it to average down from bad entries, average up into strong positions, and build a portfolio worth over $20,000 on $15,000 invested — steadily, without drama, one paycheque at a time.
Start where you are. Invest what you can. Average in over time. Let compounding do the rest.
Cheers for reading,
Alex.
I’m not a financial advisor. Everything in this post is based on my personal experience and approach. Always do your own research before making investment decisions.
Want to go deeper? Read how I structure my TFSA, the book that shaped my investing mindset, and how we budget as a couple to make consistent investing possible.
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