The Simplest Explanation For Dollar-Cost Averaging
Start Investing the easy way
When it comes to making purchases of financial assets, timing the market rightly could be quite difficult. In the world of cryptocurrency trading, this is a problem most traders come across frequently.
But why is this so? Well, some cryptocurrencies — like a lot of financial assets today — are volatile. Meaning they tend to frequently fluctuate high and low in value. A lot of investors speculate on prices, and these speculative bets result in a quick influx or outgo, resulting in significant volatility.
The fact that cryptocurrencies are quite new is a big reason for this. All new ideas need time to settle and become accepted, and cryptocurrencies are no exception.
There’s a solution that works in solving this problem though, it’s called Dollar-Cost Averaging (DCA)
What you need to know about DCA
Ok, so what exactly is dollar-cost averaging?
In simple terms: It involves deciding the total amount you wish to invest in chosen cryptocurrency — Bitcoin, Ethereum, Solana, etc. Then, instead of investing the money as a lump sum, you invest it in smaller equal instalments over a specific period of time.
DCA is a popular strategy used by new and experienced investors to achieve consistent returns while mitigating market risk. It’s tough timing a turbulent crypto market, so you could use DCA to convert volatility into opportunities.
Brief history of DCA
Benjamin Graham in his book titled “The Intelligent Investor” provided the first widely accepted definition of dollar-cost averaging. It was defined as “investing a set dollar amount in the same investment at fixed intervals over time”.
Why should you DCA?
Apart from being a safe strategy for investing in cryptocurrencies, dollar-cost averaging can generate decent returns for investors. For instance, if you had started investing as little as 1000 Naira weekly in bitcoin 3 years ago (1st Jan 2019 till date), your total investment portfolio would have looked like this;
Total invested: N154,890.4
Return on investment: N535,119.2
Invested amount + returns: N690,009.6
% return on investment: 345%
Average % annual return on investment: 116%
Getting started
Fluidcoins’ mission is to develop an open financial system for Africa — giving people the tools they need to start investing in crypto is a critical component of achieving this.
This is why we’ve created the easiest way to implement the DCA technique into your investment strategy. In 5 easy steps, you’ll be able to start investing right in our new mobile app.
See below:
👉🏽 Join the waitlist to get an exclusive invite once we launch.
