Hi in this article we will talk about an investment strategy the Dollar Cost averaging ( DCA ).
What is the DCA
The DCA strategy allows investors to invest without caring if they enter the market on the wrong time. It works by investing a small amount of money over an extended period of time for exemple 50 dollars every month. By doing so it reduce the volatility. It works when the price af an action or crypto is in an up trend in a very long time frame, take for exemple the S&P 500 :
That’s why i prefer DCA with ETF or BTC and ETH instead of some less predictable altcoins.
For this exemple we will take the S&P 500 :
The "Accumulated Shares" column represents the total shares accumulated over time through the DCA approach. The "Total Investment" column shows the cumulative investment made until that point. The "Current Value" column calculates the current value of the investment based on the accumulated shares and the corresponding S&P 500 price. The "Profit/Loss" column indicates the difference between the total investment and the current value.
Remember this an exemple the real value is very different it is just for illustration only.
The Pros and Cons :
Pros :
- Suitable for all budgets
- No need for a technical analysis
- Nice for people that don’t have a lot of time
- Reduce volatility and risk
Cons :
- Does not maximize performance
- More costs fees than a single investment
For the second cons, you need to be careful with which platform you will use because the fees differ a lot but sometimes there are special promotion, for exemple with Binance that will offer fees on there auto-invest program. The crypto(s) purchased under the Auto-Invest program will then be loaded into the Simple Earn portfolio to continue to generate performance.
Conclusion :
The DCA is a very good way for beginner to enter the maket and is also profitable for more experienced person who just want to grow there money.
Disclaimer : This not a financial advice, it’s your money so be careful where you put it
As alaways, thank you for reading
