Dollar Cost Averaging, explained.

Be there all the time, so you never miss the ups

Monthly savings in assets to buy asset units at different times, one or more times a month. This means that you will buy both when the market goes up and when it goes down. Spreading the purchases over different occasions, instead of placing a larger order at one and the same time, will in theory decrease the risk of your assets falling in value.


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Dollar Cost Averaging

Breakdown

1. March
You start monthly savings and the asset's value is $10 dollars per unit.

2. July
The asset's value has gone down 20% to $8 dollars per unit. Your monthly savings will thus give you more asset units for the amount you save.

3. September
The asset's value has recovered to $9 dollars per unit. Now you have regained more than the entire previous devaluation.

4. November
The value is again $10 dollars per asset unit. If you had made a one-off deposit in March, then your value increase would be zero. Due to your monthly savings you have instead traded asset units cheaper. These assets have now also increased in value and you have earned a total of 10% on the increase.