facebookWhat is the simplest way to explain Dollar Cost Averaging? - Seedly

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Anonymous

04 May 2021

General Investing

What is the simplest way to explain Dollar Cost Averaging?

Can anyone explain this in the simplest way ? How can we make good use of this ?
Appreciate

Discussion (4)

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Put $X/month to a piggy bank, over time the piggy bank grew fat on top of your initial deposit

Huang Yixuan

04 May 2021

Person at Seedly Community

You have $6000 and you want to buy pens over 5 years, because you believe that after 5 years, you will be able to sell these pens and make a profit.

Dollar cost averaging means that, you break down your $6000 and buy $100 worth of pens every month.

On months where the pens are in hot demand, $100 can get you 5 pens.

On months where the pens are low in demand, $100 can get you 10 pens.

Because you're doing this steadily, the price you pay for the pens will average out.

This works only if you think that eventually the price of your pens are profitable!

Not sure if this explanation is clear haha

Every month when u get your salary. Immediately throw $xx into a S&P500 ETF / robo-adviser. Then go ...

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