{"id":3057,"date":"2017-08-03T00:16:43","date_gmt":"2017-08-03T00:16:43","guid":{"rendered":"https:\/\/raizinvest.com.au\/investors\/the-advantages-of-dollar-cost-averaging\/"},"modified":"2021-02-08T04:41:24","modified_gmt":"2021-02-08T04:41:24","slug":"the-advantages-of-dollar-cost-averaging","status":"publish","type":"post","link":"https:\/\/raizinvest.com.au\/investors\/blog\/the-advantages-of-dollar-cost-averaging\/","title":{"rendered":"The Advantages of Dollar Cost Averaging"},"content":{"rendered":"
<\/figure>\n

\"\"<\/p>\n

Markets
\ngo up and markets go down. This is completely normal, and is known as market
\nvolatility or risk. The Raiz Philosophy<\/a><\/span> is to invest small amounts regularly,
\neven in falling markets as this can help you to ride out the downturns in the
\nmarket and is one of the keys to having a healthier balance over the long run.
\nThis is the well-known principle of Dollar Cost Averaging. For more information on Raiz fees, click here<\/span>.<\/a><\/p>\n

How
\ndoes it work? For example, say you have $1,000 to invest. Instead of investing
\nit all at once, you could invest $100 each month into the market for 10 months,
\ndespite the changes in the market value.<\/p>\n

If
\nfor example the stock of choice was priced at $10 the first month, you would
\npurchase 10 units. If during the second month the stock was priced at $5, you
\nwould purchase 20 units, and so on.<\/p>\n

In the end, you would have purchased more
\nshares when prices were lower and fewer shares when prices were higher. The
\noutcome is that you may have invested more prudently than simply investing the
\nmoney all at once in a lump sum.<\/p>\n

Let\u2019s
\nlook at the other key advantages to sticking with Dollar Cost Averaging (DCA):<\/p>\n

 <\/p>\n

Avoids
\nBad Timing<\/h3>\n

Investing in one lump sum and trying to pick the best price to enter the stock is known
\nas market timing, and is something very difficult to do and get right.<\/p>\n

If an investor could have any superpower in the world, it would be to pick the low
\npoints of the market. Many have tried, succeeded and failed but no one knows
\nexactly when the lows and highs will happen, and no one can stop unwanted
\nsurprises from happening.<\/p>\n

Dollar Cost Averaging can provide a disciplined strategy as it ensures you are not too exposed to
\nfalls in the market when you buy at the top; and rewarding you when the market
\nrecovers, for buying when the market was falling.<\/p>\n

By not depending on the
\ntiming, DCA can smooth out the market\u2019s ups and downs.<\/p>\n

 <\/p>\n

Reduces
\nRisk<\/h3>\n

Dollar Cost Averaging is most effective in a long term saving strategy. As the market moves up and
\ndown, dollar-cost averaging over time reduces your risks of trying to pick the
\nbest times to invest from these swings.<\/p>\n

By viewing falling markets as buying
\nopportunities, you can significantly enhance your long-term return potential
\nwhen the market rebounds.<\/p>\n

 <\/p>\n

Removes
\nEmotional Investing<\/h3>\n

People often make decisions based on emotion or loss aversion. Loss aversion refers to
\nan investor\u2019s tendency to strongly prefer avoiding losses to acquiring gains.<\/p>\n

Studies suggest that losses are twice as powerful, psychologically, as gains,
\nleading this type of investment mindset to be more likely to make the mistake
\nof needlessly selling holdings and switching to cash in a down market.<\/p>\n

By
\navoiding the media hype or fear in picking the \u2018right time\u2019, investors can
\navoid both the euphoric and depressive investment traps.<\/p>\n

 <\/p>\n

A Dollar Cost Averaging strategy is in line with the Raiz\u2019 philosophy and provides a disciplined
\nstrategy.<\/p>\n

\u201cWe
\ndon\u2019t have to be smarter than the rest, we have to be more disciplined than the
\nrest.\u201d<\/i>\u00a0\u2013 Warren Buffett<\/a><\/span><\/p>\n

 <\/p>\n

\n

 <\/p>\n

Don\u2019t have the Raiz App?<\/h3>\n

Download it for free in the App store or the Webapp below:<\/p>\n

\n
\"download-raiz-app\"<\/a>
Click to download the Raiz app<\/a><\/figcaption><\/figure>\n

 <\/figure>\n

Important Information<\/strong><\/span><\/em><\/p>\n

The information on this website is general advice only. This means it does not take into account any person\u2019s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.<\/em><\/p>\n

A Product Disclosure Statement for Raiz Invest and\/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.<\/em><\/p>\n

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.<\/em><\/p>\n

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.<\/em><\/p>\n

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Markets go up and markets go down. This is completely normal, and is known as market volatility or risk. The Raiz Philosophy is to invest small amounts regularly, even in falling markets as this can help you to ride out the downturns in the market and is one of the keys to having a healthier […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[70,65,73],"yst_prominent_words":[580,98,581,577,582,151,224,245,233,579,227,289,313,97,82,117,166,125,239,578]}