What is Dollar Cost Averaging (DCA)?
It is a strategy where you invest the same amount of money consistently every week or month, regardless of market conditions. It is a simple strategy that keeps you invested during the ups and downs of the market, helping you navigate through market volatility intelligently.
How does DCA work?
When the market dips, it gives you the opportunity to buy more assets at a lower price. Similarly, when markets trend upwards you’ll be buying assets at a higher price.
By investing in the highs and lows, you’re averaging the amount you invest over a long period of time, maximising your potential returns.
Another benefit of DCA is that it can help you to overcome your natural tendency to “buy low and sell high”. When the markets are rising, it can be tempting to invest a large amount of money in hopes of making a quick profit. However, this can be risky, as markets can suddenly tank and you’re at risk of a huge loss. With DCA, you only need to commit to your regular investment amount, which takes the emotion out of the investment process.
DCA is a useful strategy, especially for those new to investing. However, the same investing approach may not yield the same results for everyone. Do your own research and evaluate the risk before investing.
Accumulating wealth is a slow process, but remember the key to achieving financial wellness is to save and invest consistently. As the saying goes, sikit-sikit lama-lama jadi bukit. #YouCanDuit
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