Why Graham Stephan Believes You Should 'DCA and Chill'

This Graham Stephan advice could help you make smarter investing decisions.

Investing your money in a brokerage account can be a great way to build wealth -- and also a great way to lose a whole lot of money if you don't make smart investing choices.

Finance expert and YouTube personality Graham Stephan recently sent out a tweet showcasing someone who had lost a lot of cash in the market. Stephan suggested with the tweet that there was a better investing strategy that could reduce the likelihood of financial disaster.

Here's why Stephan says to DCA and chill

Stephan's tweet featured a video of a trader who was looking at stock charts on a screen. The caption on the video read, "When you lose a doctor's yearly salary in 10 minutes trading in the stock market." The trader, who obviously saw his portfolio balance decline substantially, picked up a hammer and threw it at a television on the wall, cracking the screen.

Stephan's tweet above this video noted, "This is exactly why everyone should just DCA and chill," with "DCA" standing for "dollar cost averaging."

Dollar cost averaging is a popular -- and widely recommended -- approach that involves investing a steady amount of money on a set schedule. Often, people DCA into index funds, such as an S&P 500 fund or an index fund that tracks the performance of the market as a whole.

As Stephan demonstrated with the posted video, day trading -- or any type of short-term trading -- can carry a huge risk. There's a very real possibility that you could lose a fortune in a few minutes if you're an active trader because it can be impossible even for the experts to predict what's going to happen with the market.

The trader featured in Stephan's video was obviously upset about losing hundreds of thousands of dollars. And, of course, incurring the additional cost of a smashed TV probably wasn't going to help make him feel any better. And the average person would also be justifiably upset if they lost a lot of their hard-earned money very quickly due to market volatility.

To avoid the stress of this type of situation, along with the threat to your long-term financial security, Stephan explains that dollar cost averaging can be a much calmer -- or more "chill" -- way to invest.

Should you listen to Stephan's advice?

Stephan's entertaining tweet makes an important point that is absolutely worth listening to.

Timing the market is hard. Not only could you buy at the wrong time and lose a lot of money, but you could also miss out on many potential gains if you wait too long to get your money into the market.

Dollar cost averaging means you're always buying, so you won't acquire all of your assets at a bad moment. Instead, you may buy high sometimes and buy low at other times, and if you're investing the same amount of money each time, you'll acquire more shares at that low price since each one won't cost as much.

If you're DCA-ing into index funds, you're also getting instant diversification while buying lower-risk investments so you don't have to worry about huge swings in your portfolio balance. If you don't want to find yourself throwing something at a TV because you're so distraught at big market losses, this is a great approach that's well worth trying out.