Teaching Dollar-Cost Averaging: An In-Class Student Team Simulation

Abstract

This paper presents a class tested exercise requiring student teams to perform investing decisions with the objective of maximizing the portfolio value. Afterwards, dollar-cost averaging (DCA) is introduced and usually achieves a greater portfolio value than that of most teams. Students are then assigned the task of determining the lowest and highest possible portfolio values for the simulation. DCA is then assessed on its nearness to either the worst or best (optimal) value. The exercise is enjoyable for students and offers several points of learning, including that DCA is an attractive investing strategy that offers many benefits and performs well.