facebookI have questions on Dollar Cost Averaging (DCA). If i do it every 6 months, does it mean the units i received will be determined by the price of the purchased stock? - Seedly

Advertisement

Anonymous

06 Mar 2020

General Investing

I have questions on Dollar Cost Averaging (DCA). If i do it every 6 months, does it mean the units i received will be determined by the price of the purchased stock?

For example if I buy 1000 units at $1 in jan and buy 666 units at $1.5 in June and buy 1250 units at $0.8 in Dec. Is it better to dollar cost or to buy large units when price of valuation is low?

Discussion (7)

What are your thoughts?

Learn how to style your text

Rais M

06 Mar 2020

Accountant at SME

One of the key factor of DCA is to be consistent, regardless of the market condition. You should be investing the same amount of money periodically (monthly, quarterly, annually, etc) and not be timing the market by buying more or less depending on market condition or price valuation.

During a downward trending market, dollar cost averaging does better whereas in an upward trending market, lump sum investment does better. If you do not want to time the market, doing DCA would be a sensible strategy to follow for the long term.

Yes, the number of units you purchase decide by the price at that point of time.

DCA meant to be put in a fix amount of money at a fix period, so that you can avoid emotional purchase and not to time the market.​​​

If you want to buy large units when valuation is low, you are not really DCA already. DCA is putting the same amount of money consistently every month. I would rather you stick to the same strategy to reap the benefits.

I think most people do it monthly and in small amounts, because you have to do it quite a number of ...

Write your thoughts

Advertisement