One question that always comes back during times of high volatility is “Should I average up? Down?”. What is Dollar Cost Averaging (DCA) and how to use to your advantage? This is what we’ll discuss in this episode!
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- Let’s make things clear first and define what DCA really is.
- Is there a context in which someone would like to average up or is it simply part of the game?
- How should investors use DCA to their advantage? With a systematic investment plan (SIP)? DRIPs? A Cash reserve?
- If an investor is using a cash reserve to dollar cost average, what frequency would make sense? Monthly? Twice a year?
- Dollar Cost Averaging (DCA) is more popular during high volatile markets as it can smoother the curve. Mike explains the benefits in more details.
- DCA can sound simnilar to market timing, which often leads to paralysis by analysis. What are the other risks associated with the Dollar Cost Averaging strategy when done with an opportunist way?
- Does DCA really work? Are there examples or studies that prove a systematic investment plan brings more results?
- Withrop Wealth Study
- Hartford Funds article
- Mike ends up the episode by summarizing the pros and cons of DCA: Remember you’re an investor, not a gambler!
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Over the past 3 years, investing has been tough on investors’ nerves. We went through multiple situations creating lots of uncertainties. How should we handle volatility in our 40’s, in the accumulation phase, or if we are past 65, retired, and living off our portfolio income?
How to Handle Market Fluctuations at 40 and at 65 [Podcast]
Next week, we welcome Newcomer Investor as a guest on the show! You can subscribe using the button below the video not to miss it. You might as well watch the interview Mike previously did as a guest.
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The post Should You Average Up? Down? – A Dollar Cost Averaging (DCA) Discussion [Podcast] appeared first on The Dividend Guy Blog.