How Dollar Cost Averaging (DCA) Investment Strategy Works
Investment is never easy, especially in markets where asset prices captures high volatility. However, 3percent encourages everyone to see investments as a long term game that will help you build wealth overtime.
3percent is a passive income wealth management Software as a Service (SaaS). We aim to help you build a steady stream of passive income and become the world’s most preferred passive income source by filling the gap that other asset types have failed to address.
Therefore, 3percent would like to be your partner in making investments easier for our customers. As mentioned in this article, 3percent can help you deal with market volatility with DCA investment strategy to maximize the profit. 3percent would like to grow with all of our customers.
3percent understands that there are concerns from individuals when starting to make investments around:
- “When shall I start investing?”
- “When is the right time to get the best price?”
- “Am I getting the best price?”
- “Should I wait for a bit before investing?”
Dollar cost averaging (DCA) is the best investment strategy that can ease your concerns around the above questions. It is the strategy that supports investors to invest regularly and deals with volatile market. Moreover, DCA is proven to perform well in bear markets.
In this article, we will share how dollar cost averaging investment strategy works. We will refer to dollar cost averaging as DCA.
Core concept of DCA is to invest certain amount of money in a certain asset on a regular basis regardless of the price when you buy.
Imagine if you have made a lump sum investment — you would have to risk whether you have made a correct decision, which leads to the question “did I just made a good deal?” If the asset price goes up, that means you are gaining from that investment, but what if it goes down?
To reduce the risks in a single investment, DCA concept is introduced. DCA promotes investing in a long period of time, buying the asset at both high and low price. Buyers can set the buying period depends on their own, but the key is to invest regularly.
Let’s take a look at some examples.
Meet John. John would like to start investing in a total of $1,000 in asset A. If asset A costs $10 each, John will hold 100 units of this asset.
After John was introduced to the concept of DCA, he started to implement this strategy with a 1-month period.
As shown in the table, more shares will be bought if the asset price is low, and less shares will be bought if the asset price is high. As a result, the average cost per share is lower.
With the same total investment amount of $1,000, the average price per share is then around $9. This means that John is buying asset A at a lower price with DCA than with lump sum strategy! Over the span of 5 months, John is able to own total of 111 shares of asset A, which is higher than when he invested with lump sum strategy.
Even though there are some months that if John would have made the whole lump sum investment, he would have captured higher amount of asset (such as April), but applying DCA helps reduce his risks on months like May where the asset price is much higher.
DCA can be used with every type of investments. The key is to have plan and consistency.
3percent’s goal is to make investments much more easy for our customers. We make sure that we are using the right investment strategy for the right market volatility to maximize the gain. Our AI-powered trading bot trades on your behalf, 24/7. Your money is 100% safe as our trading bot trades via read-only API.
Let 3percent take care of your portfolio for you. Start trading now at our website, 3percent.io!
— 3percent team
