There are many forms of investment, one of which is DCA investment. People have probably heard of this term quite well. Some may know the name but don’t really know the meaning or principle of DCA investments. Let’s take a look.
DCA, which stands for Dollar-Cost Averaging, is a type of investment method that averages costs regardless of market conditions. similar to a fixed deposit. We will continue to invest in each period, every month, with the same amount of investment, regardless of emotion or condition, to make investment decisions, which allows us to invest regularly to create wealth and stability in the long term.
Therefore, the investment asset to be DCA should be an investment asset that has a tendency to increase in price or stability to guarantee that we are not planting the wrong pot or, at least, we have chosen the soil that is good for cultivation. For example, stocks with good fundamentals are stable and growing steadily, or investing through mutual funds is another option that we can do. People may already be doing DCA without realizing it, because people who have a fixed salary already have this kind of investment. For example, a private company employee has a provident fund to gradually collect the fund on an equal basis every month, regardless of the amount of the investment in that month.
1.Investing helps create discipline in saving and investing. Because we have to continuously invest on a regular basis every period,
Because one of the factors that make us successful is discipline. DCA will help create discipline for us because we are now able to do it via our mobile phone and automatically cut through the account. We are now able to do DCA through the bank or by ourselves via APP Streaming.
The steps and methods depend on the bank or the broker.
2. Facilitating investment opportunities Whether the asset goes up or down,
If we look at the point of view that assets are cheap, we can clearly see the advantages that we have invested in a good price range. We buy cheap, but many people may wonder if the asset goes up when it goes up. If we buy during that time, how good will it be? Many people may view it as a disadvantage. But do not forget that we do DCA as a long-term savings opportunity. At least it’s our savings. The asset is going up or down. If we look at the short-term volatility, it may be a matter of whether it is worth it or not. But in the long run, we will see that it is just one small wave that we should not fluctuate with the market. Because we choose DCA, we choose assets that are stable and growing continuously. As a result, for our long-term investment, we do not have to worry about the short-term volatility of the asset.
3. It allows us to invest comfortably, reducing the risk. Moreover, there is no need to keep an eye on the volatility of investments.
Many people may be unable to bear the same risks or concerns associated with volatility. If we know that we don’t want to worry, we do not like risks. Investing in the DCA model is considered the right model for people who want a low-risk investment.
However, every investment carries risks. We may have heard the term “High Risk, High Return.” The higher the risk, the higher the return. But sometimes investments can encounter ‘High Risk No Return’ as well. What we want to say is that everything has a different angle. There are always two sides to a coin, so what we should do before investing is to minimize the risk as much as possible by studying asset selection and investment style selection. These things will make us less vulnerable and increase our growth opportunities.
Therefore, DCA investing is a form of investment that allows us to reduce the risk of loss on an average cost. And on the one hand, it increases our chances of making profits or growing as well.