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Dollar Cost Averaging (DCA) - Really?

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rmsadkri
@rmsadkri
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2 min read

If you are interested in investing ( crypto, stock, bond) and are surfing the web to find relevant information to guide you in the process then you must have come across many different investment strategies. "Buy the dips, sell the highs" is the most common narrative.And, there are many many technical analysis suggestions and indicators that may help traders to project where the market will go in the next 15 minutes, hours or in a day. It is overwhelming for many irrespective of where they are in their investment journey.

When you are reading those posts, you may have came across another - rather simple - strategy that suggests you to buy your asset irrespective of the highs and lows that we see in the market. I see this as a best strategy for someone like me. There are two reasons I see that made me think this strategy is beneficial for me while investing in crypto.

  • I am not confident that I have time, zeal, and resilience to be a day trader. I also do not have the technical prowess and knowledge to better understand the trend. It seems I simply don't have what it takes to make profit from trading in a short term. In that case, the only other strategy that I can rely on is the dollar cost averaging.

  • I am a long term investor with stocks. I have 20 tickers (including bonds, stocks, and ETFs) in my portfolio that I hold as my long term investment. I regularly contribute to those stocks irrespective of their performance. Some days, if I witness marked drop like that of last March, I may invest more. DCA is a proven strategy with my stock and I can bring that to the crypto investment. Long term investment is the same irrespective of what assets you are dealing with.

So, if you are a long term investor who looks at the 10-15 years scenario and you do not have time to learn day trading skills then you may be better off with the dollar-cost averaging.

It is funny that as I sat to write down this post I received a promotional email from Uphold requesting me to set up a regular payment to crypto investment. In the email, they mentioned how DCA is one of the best and proven strategies to invest in Crypto. The results are said to be as efficient as buying dips and selling highs :)

I am not sure if it is that easy. But, it is accepted that by investing regularly and with the long term mindset you minimize the risk and widen your chances.

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