If you invest $100 every month in a stock, over 12 months, you will have invested a total of $1,200. If the stock price goes up and down each month, dollar-cost averaging means you buy more shares when prices are low and fewer shares when prices are high. For example, if the stock price is $10 in month 1, you buy 10 shares. If it goes up to $20 in month 2, you only buy 5 shares. By the end of the year, you might own 65 shares instead of 60 based on varied prices. This helps reduce the impact of market volatility.

Dollar-cost averaging is like buying toys every month. Sometimes, a toy you want is $10, and sometimes it’s $20. If you always buy one toy every month, you get some when they're cheaper and some when they're more expensive. In the end, you have a mix of toys that didn't cost you too much when prices went up and down.