Averages convert market cycles into a normalized straight line. In investing, many use dollar-cost averaging as a risk management strategy when markets feel scary. In this strategy, you choose a stock you want to invest in long term and invest equal amounts at regular intervals (weekly, monthly, quarterly), regardless of market performance. It is an accumulation strategy where share price is irrelevant. As you buy in intervals, the dollar cost per share averages out.
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When does dollar-cost averaging make sense?
The dollar-cost averaging strategy has its pros and cons. In a bull market, it might lower your returns but grow your returns in a bear or a volatile market. Let’s understand this with energy stocks, which have been volatile amidst the global energy crisis.
Enbridge (TSX: ENB) is a perfect stock for dollar-cost averaging. The energy market has been volatile for some time, but energy infrastructure stocks like Enbridge, with their low-risk business model, have reduced the volatility.
Looking at the last five-year stock price momentum, every surge followed a dip. The stock has largely been range-bound, hovering between $45 and $55 until in the second half of 2024 when the company acquired three U.S. gas utilities and expanded its asset base. A V-shaped recovery in 2023 and 2024 makes a perfect case for dollar-cost averaging.
2025 added new risk of tariffs, but also opportunities for energy exports as the US-Iran war and US-Canada trade war encourage countries to diversify energy supply. It increased Enbridge’s share price range to $60 and $75. Enbridge stock has dipped 16% since July 2026, negating its first-half rally. This time, the dip comes from yet another acquisition, of Tallgrass Energy’s crude oil business.
Despite the peaks and troughs, Enbridge has met its guidance and grown dividends by 3% annually. Dividend growth is expected to remain slow till 2030 as it accelerates capital spending. However, dividend growth could pick up as new projects are commissioned and contribute to its cash flow.
How does dollar-cost averaging work for Enbridge?
Using dollar-cost averaging in a volatile market can help you accelerate your returns. Suppose you invested $500 per month in Enbridge in 2023 and 2024, when the market was scary for energy stocks. I took the highest share price for every month in the table below.
In 24 months, you invest $12,000 and buy 227 Enbridge shares. Your average cost per share is $52.86, before brokerage and other charges.
| 2023 | Enbridge Stock price | Enbridge shares purchased at $500/month | 2024 | Enbridge Stock price | Enbridge shares purchased at $500/month |
| Jan-23 | $56.33 | 9 | Jan-24 | $50.03 | 10 |
| Feb-23 | $54.84 | 9 | Feb-24 | $48.24 | 10 |
| Mar-23 | $53.50 | 9 | Mar-24 | $49.10 | 10 |
| Apr-23 | $54.05 | 9 | Apr-24 | $49.67 | 10 |
| May-23 | $54.05 | 9 | May-24 | $52.34 | 9 |
| Jun-23 | $51.30 | 10 | Jun-24 | $49.93 | 10 |
| Jul-23 | $49.94 | 10 | Jul-24 | $51.83 | 10 |
| Aug-23 | $49.47 | 10 | Aug-24 | $54.49 | 9 |
| Sep-23 | $48.57 | 10 | Sep-24 | $56.09 | 9 |
| Oct-23 | $45.24 | 11 | Oct-24 | $58.28 | 8 |
| Nov-23 | $47.40 | 10 | Nov-24 | $61.09 | 8 |
| Dec-23 | $48.25 | 10 | Dec-24 | $61.99 | 8 |
| 116 | 111 | ||||
| Total | $12,000.00 | 227 | |||
| Average Cost per Share | $52.86 |
Today, your $12,000 is worth $15,356 and is earning $880.76 in annual dividends at $3.88 per share.
Investors use dollar-cost averaging to earn efficient returns, as it is impossible to time the market. Assuming your luck goes both ways and you invest $12,000 as a lump sum at the lowest and highest price, the delta shows how average cost mitigates the risk of buying at a high price and the missed opportunity of capturing the low price.
| Particulars | Enbridge Stock Price | Enbridge Shares Purchased for $12,000 | Dividend @ $3.88 | Delta From Average | Investment Value @67.65 | Delta From Average |
| Lowest stock price | $45.24 | 265 | $1,028.20 | -$279.36 | $17,927.25 | ######## |
| Highest stock price | $61.99 | 193 | $748.84 | $131.92 | $13,056.45 | $2,300.10 |
| 2-year average | $52.86 | 227 | $880.76 | $15,356.55 |
Is now a good time to buy Enbridge?
Enbridge has dipped closer to its 52-week low. Now is a good time to invest a lump sum. You could consider Canadian Natural Resources for dollar-cost averaging, as oil prices might keep the stock volatile.
