Dollar-Cost Averaging: How it can help you be a better investor.

Everyone has, at some point, heard about an opportunity from a friend and felt compelled to invest money in it. However, you are probably hesitant to make a sizable financial commitment because, as with any investment, there is no guarantee of a profit. You’ll want to increase your chances of success while safeguarding yourself from losses.

This post will provide a better understanding of how to accomplish that.

Dollar-cost averaging is a time-honored method of investing involving making small, regular investments over a long period, regardless of price.

Let’s look at a hypothetical scenario where you want to invest $2,000 in bitcoin, but you’re not sure if the price will drop after you buy it due to the market’s volatility.

If you use dollar cost averaging, you will invest $200 per week for the next ten weeks. In this manner, you will have invested a total of $2,000 in Bitcoin, but at various price points. Perhaps your first purchase was when the price was somewhat high, so you got fewer bitcoins, but your second purchase was when it was low, so great!

Dollar-cost averaging involves investing at different price points.

Even though the price was the same, you received more value. When you add all of this up, you may lower your average cost per bitcoin compared to if you bought everything at once. It also prevents significant losses and allows for higher profit margins.

Let’s look at how your split may appear if you used this strategy to purchase bitcoin.

You can see from the example above that dollar cost averaging enabled our imaginary investor to profit from a price decline in weeks four and five. The last two months helped him gain more and balance his investments, although he received less bitcoin at the same price in the first three months.

Let’s examine the return on his investment without the help of dollar cost averaging.

Now, if he had invested the entire sum in the first month, his $2,000 would have only been able to buy him 0.102 BTC at the price of 1 BTC being $19,570.

Since there is virtually no way to predict in advance the optimal price to purchase a coin, dollar cost averaging is extremely helpful in the cryptocurrency market and in investing in general.

Other advantages of dollar cost averaging include:

• Setting up automated buy orders promotes sound investment practices.
• As a result, you are more likely to have money available to invest when the chance presents itself. As in the case of a market decline.

If you enjoyed this article, you can learn more about investment strategies here.