What is the primary purpose of dollar-cost averaging?

The primary purpose of dollar-cost averaging is to reduce the impact of market volatility on investments. This investment strategy involves regularly investing a fixed amount of money into a particular asset or portfolio over a consistent time frame, regardless of the asset's price at that time.

By doing so, investors purchase more shares when prices are low and fewer shares when prices are high. This averaging effect can lower the overall cost per share over time, which helps to mitigate the risks associated with market fluctuations. As a result, dollar-cost averaging helps foster discipline in investing and can help protect against emotional decision-making that often arises during times of market volatility.

The other options do not accurately reflect the core concept of dollar-cost averaging. While it can lead to more favorable investment outcomes in volatile markets, it is not primarily designed to minimize total investment amounts, seek to time the market for higher returns, or diversify investments across different assets.