Have you ever heard of dollar-cost averaging?
If you've been involved with investing for a while, chances are you've at least heard the term but what does it mean? The concept is simple. You invest a regular set amount of money in the same stock or coin at regular intervals.
For example, every 2 weeks I invest $200 into say BTC. This happens each time I am paid and goes into BTC regardless of the price. These regular investments can be set to happen daily, weekly, monthly, or to whatever works best for your financial situation.
Now you may be asking, "Well what happens if BTC is up the day I am set to buy?"
That does not change the fact that we buy. This may seem counter to what some believe or practice currently but the idea is that regardless of the price it will inevitably be lower than what we have paid previously at some point resulting in more bang for our buck. If by chance it does continue to increase, we may not be able to buy as much but we have received the gains from our previous investment. Whatever the case is, this strategy helps to lower the price per share/coin over time.
More importantly, when investing with this strategy it helps to avoid the fears of dumping a massive lump sum into a single investment and dealing with the dramatic swings. This can often result in individuals making rash decisions to sell or jumping into the hype of something just to buy at the peak. The idea of investing can often be intimidating to the new investor and individuals who are just starting out. But by dollar-cost averaging, you will help to train yourself to buy regardless of the price knowing that you are improving your standing with time.
The most important aspect to consider when thinking of using dollar-cost averaging is - does it make sense for my investment style? This strategy requires time to work properly and to help lower your average cost per share/coin so understand that this will not be an overnight strategy. It is also important to be putting these routine investments into something that is worthy of the effort.
Make sure to do proper research and reading on whatever it is you are intending to buy. If you do not understand what you are investing in, then you shouldn't be investing in it. This strategy is not foolproof and can very much result in losing your investment if done incorrectly or on a depreciating asset.
Good luck out there.
Posted Using LeoFinance Beta
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