Is Dollar Cost Averaging/DCA for You?
Photo by Susan Yin on Unsplash Author: Andrew Lee About 3 minutes read. You may heard about DCA, aka Dollar Cost Averaging . This is the basic concept to spread risk across a period of time to smooth out the risk (swing up and down in the market) to lower the unit cost. Here is a simple illustration to show how investments are spread out into several lots over a certain period of time, just for those that hate numbers 😆, the fix invested amount over 9 purchases fluctuate according to the stock market price of that day. You can see the purchased share # as the blue bar. The red line is the market price fluctuating on a daily basis, and the orange line is the average cost of share over time (accumulative). This is the tabular view of the above chart. It is a strategy to mitigate timing risk. However, it is not the only method. You could combine with other strategies such as the candle sticks, moving average (MACD), Fibonacci retracements, RSI (Relative Strength Index), or even as simple...