Dollar cost averaging (or DCA) is the investing strategy of dividing up the total amount to be invested and periodically purchasing over time in an effort to reduce the impact of volatility on the investment.
Dollar cost averaging is where you invest smaller, fixed amounts on a regular basis. It’s generally done over an extended period.
For example; you may have $2000 you want to invest. Rather than investing the lot at once, you might invest $20 every fortnight.
It takes away the emotion of buying and selling. Regardless of what the market is doing, if it’s up, or if it’s down, you will invest the same amount each time.You don’t have to think about it.
What this means, is when the market is down, you will buy more, and when the market is up, you will buy less. So rather than risking all of your money at once, you buy into the market often, reducing the effect of the market moving up and down.
It can be a great way to build wealth over time.
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