In more detail
Because a fixed amount buys more shares at low prices, your average cost per share is the harmonic mean of the prices, which is always at or below their simple average. Most people already do this through regular contributions from each paycheck. The real alternative arises only when you have a lump sum: invest it at once, or spread it out over months. Since markets have risen more often than they have fallen, investing a lump sum immediately has historically come out ahead more often than not, at the cost of more regret if prices drop right after.
Why it matters
It removes the pressure of timing the market and keeps you investing through falls, when shares are cheap. It does not guarantee a profit or protect against a market that keeps falling, and per-trade fees can eat into small, frequent purchases.
Example
Investing $100 at prices of $10, $8 and $12:
| Price | Shares bought |
|---|---|
| $10 | 10.000 |
| $8 | 12.500 |
| $12 | 8.333 |
| Total | 30.833 |
$300 bought 30.833 shares, an average cost of $9.73, below the $10 average price.