Dollar Cost Averaging (DCA) is one of the smartest, easiest investment strategies for beginners. It involves investing a fixed amount of money at regular intervals, regardless of the asset’s price at that time. By doing this, you reduce the risk of making a big investment when prices are high and increase your chances of buying more when prices are low.
For example, instead of investing $1,000 all at once, you might invest $100 per month over ten months. When prices are high, your $100 buys fewer shares, but when prices are low, that same $100 buys more. This smooths out the average cost of your investments over time.
For example, instead of investing $1,000 all at once, you might invest $100 per month over ten months. When prices are high, your $100 buys fewer shares, but when prices are low, that same $100 buys more. This smooths out the average cost of your investments over time.
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00:00Are you tired of stressing over when to invest your money and missing out on potential returns?
00:06Today, we're uncovering a powerful strategy called dollar-cost averaging that can help
00:12you do just that.
00:13Whether you're a seasoned investor or just getting started, this approach can make investing
00:18less intimidating and more effective.
00:20Let's dive in.
00:21Here's the idea around dollar-cost averaging.
00:25Instead of waiting for the perfect time to invest, you regularly invest a fixed amount
00:30of money in a stock or fund, no matter the price.
00:33Think of it like buying your favorite coffee every week, whether it's on sale or not.
00:38Sometimes you'll pay more, sometimes less, but over time, the cost averages out.
00:46Say you have $1,200 to invest over a year.
00:50With DCA, you invest $100 each month.
00:54In January, if the share price is $20, you buy 5 shares.
00:58In February, if the price drops to $10, you buy 10 shares.
01:03In March, if it's $12.50, you buy 8 shares.
01:07You see, you're not trying to time the market.
01:10You're just buying regularly and averaging your costs.
01:13Why does this matter?
01:15First, it removes the guesswork of when to invest.
01:19You're not trying to time the market.