The Dollar-Cost Averaging (DCA) investment technique

From theory to practice, the dollar-cost averaging investment technique facilitates our first investment.

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How it works.

Dollar-cost averaging, in the US, or as it is generally known “unit cost averaging,” “incremental trading,” or the “cost average effect,” is an investment strategy that aims to reduce the impact of volatility in the financial markets by separating the investment capital into smaller sums and having them invested periodically into a given instrument, instead of all at once.

A prerequisite with this strategy is that the above mentioned smaller sums of investment capital will be separated into equal parts and will be invested into periodically into fixed time intervals and on one predetermined financial instrument.

Pros…

• Easy to implement.
• “Set and forget” investment strategy.
• Suitable for passive and beginner investors.
• Minimizes the sort term price fluctuation.
• Smaller investment capital required.

… Cons