facebookDoes dollar cost averaging really work well as an investment strategy? Especially now that countries are heading into recessions because of COVID-19, is it wise to take up this investment approach? - Seedly

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Anonymous

01 May 2020

Retirement

Does dollar cost averaging really work well as an investment strategy? Especially now that countries are heading into recessions because of COVID-19, is it wise to take up this investment approach?

I've watched several videos on the topic of dollar cost averaging and gotten very contrasting views on the suitability of dollar cost averaging, with some saying that it's the safest way to invest while others claim that it's just a marketing ploy. Is it really effective and what I consider before taking up this investment strategy?

Discussion (5)

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Angeline Teo

01 May 2020

Calculator at The Internet

Yes, dollar cost averaging is made for this type of market too.

when market keeps dropping, you continue to buy every month, so you buy cheap.

And if it rise back sharply later, you get the benefits.

even if it keep dropping and dropping, you are just buying cheaper and cheaper.

Of course in the ideal world, its best to wait for the lowest possible price and all-in, but we can't know whens the best lowest price, so dollar cost averaging is the best investment technique that works.

Hi there,

from a logical standpoint (and if You believe in the stock markets' permanence)

cost averaging is not only valuable during this crisis, but particularly during this crisis.

You'll stretch Your investments and so are never to early or to late, You'll just keep Your equanimity as You know You are "in" but never paid to high a price, but just (on long term) the average price. Boringly perfect (as passive indexing via ETFs).

You could add monthly, but also quartely or even semi-annually is completely perfect.

byebye

good luck,

Frankie

Elijah Lee

04 Apr 2020

Senior Financial Services Manager at Phillip Securities (Jurong East)

On the topic of dollar cost averaging, I will link you to an old answer that I wrote, that will rema...

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