The process of dollar cost averaging is a simple yet fool-proof way to add funds to and build your portfolio regardless of what the markets are doing.  The  premise is simple: usually done in monthly increments, you add the same amount of money each time to your holdings.  You don’t have to worry about trying to time the market, as you are adding money no matter what the situation is.  There are tons of benefits to a dollar cost averaging strategy, and it can work extremely well with ETFs. 

I’ll start with an example of why DCA helps your bottom line immensely.  Let’s say you buy an S&P 500 ETF at $100 a share, right at the height of a bull market.  Over the next year it bottoms out at $50 a share, and exactly one year after your purchase it is back to $100 a share.  Had you left your investment untouched, you would have gotten nowhere in one year.  Kind of a crappy year. However, if you would have added to your position consistently every month, your cost basis  would be much lower, and you would be up for the year, even though the price isn’t any higher than when you started out .  Over a long-haul investing career, if the markets continue to average 10-12% a year, you will do very well with a disciplined dollar cost averaging strategy. 

Notice how much time the above strategy takes?  Not much at all; an automatic transaction from a bank account and 5 minutes to log in and purchase you shares is all it takes.  Nobody should put off investing because they don’t have time.  It is ridiculously simple to open an account and begin a sure-fire investment strategy of dollar cost averaging with ETFs. 

You need to keep something in mind though.  If you broker charges you for each transaction, you definitely don’t want to add $50 a month if $10 of it goes towards a transaction fee.   If you can’t set aside enough to justify paying the transaction fee every month, you should wait and make your purchases each quarter or so.