Benefits of DCA: Forget cost savings, think risk reduction
Many investors are familiar with the concept of DCA (dollar-cost averaging) and this technique is sometimes said to offer cost savings (i.e. lowering the cost basis of the investments).
The paper Lifetime Dollar-Cost Averaging: Forget Cost Savings, Think Risk Reduction by Robert Dubil in the FP Journal however argues that
… the cost benefit of dollar-cost averaging (DCA) is dubious, since one cannot predict the path of prices. But, the risk-reduction benefit of DCA is real: averaging over time is akin to buying less-than-perfectly correlated assets. This produces a lower volatility of the terminal value of the investment — that is, a more certain outcome.
The figures below shows the volatility and risk reductions (according to the author) due to averaging:
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