Do you want to create long term wealth?
Do you want to build passive income?
Do you want financial freedom?
DCA – dollar cost averaging if used properly in your long-term investing strategy will not only bring great results but also limit the dangerous effects of emotions and volatility (the two most devastating forces when it comes to investing). What is more, when using DCA volatility actually becomes your ally, allowing you to accumulate more assets in time. Dollar Cost Averaging means that you invest in an asset with the same dollar amount at regular time intervals. By investing the same amount each time, you buy more assets when their dollar value is lower, and you buy less when their dollar value is higher. Let me show you why DCA is so good in dealing with volatility. Let’s say you are investing in 2 companies. The stock price of Company 2 is more volatile than the price of shares of company 1. For the purpose of this example, we will consider a monthly investment of $1,000 for a time period of 3 months and the possibility of buying fractions of a share.
As you can see after investing $1,000 for 3 months in company 1 you got a total of 30.46 shares for an average price of $98.49. If instead of investing on a monthly basis you bought $3,000 worth of shares, for the price of $100 you would get 30 shares. By using the DCA method you actually got more shares. You might say that 0.46 which is half a share is not a big difference, but let’s look at the other example.
Because the price of the second company is more volatile you have been able to get a much lower average share price by using the DCA method. By implementing DCA and buying $1,000 worth of shares each month you were able to get 36.66 shares of the second company. This is a difference of over 15%! Now, just imagine what would happen if you implemented this strategy long term in the crypto asset space!
DCA is hands down the best and easiest way to invest long term in highly volatile assets.
Here is a screenshot from the Bitcoin dollar cost averaging calculator that shows a portfolio of an investor who invested $100 weekly into bitcoin for 5 years. A total investment of $26,100 would be worth (at the moment of writing these words) $284,513 which translates to 990% profits. All of this by following the simplest strategy of them all and just buying BTC weekly for $100 (you could even automate it all so it’s done without you even moving your finger). I encourage you to visit this website – https://dcabtc.com/ and check for yourself how the magic of DCA works.
Thanks for reading!
Written by Piotr Borowiec