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Dollar-cost averaging is an investment strategy whereby allocations are spread out over given periods regardless of changed market prices. It helps control emotional stimuli that accompany investments.
What is Dollar-Cost Averaging (DCA)?
Dollar-cost averaging is a disciplined investment policy for managing the process of an investor’s decision in an unemotional way. This is spreading the purchases over a given time in order to reduce the effects of the price fluctuations. Rather than making one big sum in an installment in the asset class, an investor decides to invest a given amount each week, month, or every other month regardless of the price fluctuations.
Consider dollar-cost averaging as one effective way to navigate a volatile market, all without needing to target the so-called perfect entry time. Spreading your capital over already established periods can help even out your average price paid for stocks in an investment period. Often, this method is much superior to putting a large sum into the market at the price level’s peak.
In a nutshell, dollar-cost averaging could be called the perfect investment for beginners or those who don’t want to stir into the throb of market analysis.
