to top

What is the DCA (Dollar Cost Averaging) strategy

How to avoid or significantly reduce your investment losses when investing? Let's take a closer look at how DCA works and why you might seriously consider using this strategy.

What is DCA - Dollar Cost Averaging

This is an investment strategy, the main point of which is to regularly (for example, every month or once a week) buy a specific type of investment (for example, shares of company X) spending a fixed amount of money. In doing so, you should not take into account its current value (it can be low or high).

This way you can flatten the price by buying at regular intervals compared to a one-time payment. This is called reducing the volatility of an asset when entering the market.

Why does the Dollar Cost Averaging technique work?

Stock market fluctuations occur every day and it is difficult to predict short-term fluctuations. An investor can make a mistake and accidentally make a purchase at the highest price and wait a long time for the market to return to this level.

Thus, the average price per share is getting lower and lower.

This strategy reduces the risk of investing large sums in one security at the "bad" time.

After all, determining the best time on the market is one of the most difficult decisions when investing. It is easy to make a mistake and buy a stock at the wrong time, and it usually leads to negative results.

You also can set this strategy and don’t invest manually. Thus DCA is a great way to simplify your life. Simply set your DCA and automatically allocate your funds upon each deposit.

strategy

Who is the Dollar Cost Averaging technique suitable for?

- The investor is limited in funds and invests small amounts

- When buying accumulative insurance

- With monthly deductions to RRSP

- When the market falls

- If the investor does not have enough knowledge or time

- For investors who do not like to take risks

How to Invest with a Dollar Cost Averaging Strategy

I advise you to divide your investment into equal parts and start buying and then selling positions gradually, regardless of the price. This way, you can reduce the risk of not quitting at the right time.

Are there any disadvantages of the Dollar Cost Averaging Strategy?

There are also arguments against this strategy. Some believe that averaging the dollar value can lead to loss of profits during a bull market. But considering all of the above, this likelihood of losing part of your investment is not a reason why you should avoid the DCA strategy, as it can be useful and effective for many other traders.

My recommended list of best crypto exchanges
Binance 
Stormgain 
Bitfinex 
Bimex 
Kraken 

Do you have any investment experience? Share your opinion in the comments below! If you wanna learn more or know more you can contact my team or you can jump into a one-on-one call with me right now clicking one of the the below buttons.

Alessandro Rocco Pietrocola is an entrepreneur, fintecher, investor, blogger and author based in London and operating mainly in Europe, Asia and Oceania with main focus on UK, Baltic Countries, Russia, China, Hong Kong, Malaysia, Singapore, UAE, Middle East and New Zealand as area of interest! At the moment is the CEO of Astorts Group. He is an UK FCA (Financial Conduct Authority) and NZ FSPR (Financial Service Provider Register) Approved Person and has great experience as director of regulated companies.
He uses to dedicate part of his life to inspire others and help them achieve the most out of their lives. Since he was 20, he had successfully founded and managed several companies operating in the field of management consulting, wealth management and fintech. He is Member of Institute of Directors in London, Member of Changer Club in Riga, Member of Fintech Association of Hong Kong, Member of Singapore Fintech Association, Member of Non Executive Director Association in London and Member of Alumni Network of Draper University in San Francisco. He loves travelling, he is a cigars lover, an amateur golfer and a dapper man.
DO YOU NEED MY TEAM HELP?

Please write me an email with your specific case, my team will be more than happy to help you to find the best solution for your business need or to advice and support you to start a new business venture.

Contact me
City
DO YOU WANT TO JUMP INTO A ONE-ON-ONE CALL WITH ME?

Take your chance to learn from who have done most of the stuff he is talking about for himself and he knows what works – and what doesn’t – in the real world.

Consulting

Book a Wake Up Call with me, if you are moving the first steps in the business world and you wish to learn how to get started!

Wake up call

Book a Check Up Call with me, if you are already in business and you wish to check up your business and leverage my experience to improve your structure or expand your business.

Check up call

Leave a Reply

Your email address will not be published.