Hi everyone, here is the first post from my series 'Education for new investors'. I will be sharing my knowledge on topics surrounding investing and readers do not require prior financial background to understand the posts.
Enjoy ;)
❓What is DCA?❓
You might have come across this acronym before, DCA stands for Dollar Cost Averaging.
🤔What is the idea behind this?🤔
DCA is a concept based on the idea of investing a fix amount on a regular basis. For example, investing $100 on $Microsoft on a monthly basis.
🤷♂️Why would you do that ?🤷♂️
There are a few advantages on using the DCA method:
First of all, to those who are making their first steps in the investment world, it is an easy way to start off and by saving a fixed amount monthly if you don’t have a substantial initial investment.
There is a second advantage to this method, and that’s where it gets interesting. Many long term investors are trying to “time” the market, which means they are waiting for the right time to buy a share in order to get a cheaper price. But not everybody has time to track the market, and with the DCA method, investments are made regardless of the unpredictable price of the share, and will also help you to overcome the fear of a market crash.
Overtime, if you are accumulating shares in a company and the price of the share is decreasing, then your average share price will also decrease, and you will benefit from future rise even more.
One of the last advantages of the DCA method, is that by using this method, you will set out a plan to stick to, build discipline around it, and it will subsequently diminishes your fears.
Although there are other advantages of the DCA method, these are the top take-away points which will benefit new investors.
If you liked this post, please stay tuned for more posts within the series. 👍🏻👍🏻
Thank you
GSerdan
