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Dollar Cost Averaging

Dollar Cost Averaging is a strategy most investors use. Here's how it works.

Dollar Cost Averaging, or DCA for short, is the process of gradually adding buys into a cryptocurrency or stock at different values in the chart, to give the investor a better position.  Creating a personal DCA strategy helps the investor to accurately assess the progress of the companies/projects they are choosing to support, as well as review on a regular basis the overall climate of the market as a whole.

The benefits of Dollar Cost Averaging include:

  1. Avoiding Giant Lump Sum Purchases

We hear examples of people making millions off of making large buys very early into a project’s inception.  The reality of this situation, however, is that the odds of striking it rich this way are just as unlikely as choosing winning lotto numbers.  In cryptocurrency especially, the beginning of a project’s life contains more unknowns than general business itself.  Not only does the contract need to be safe and secure, but all other business endeavors along the projected timelines face complications, and potential delays.  Gradually making smaller buys, rather than going all in at once, allows the investor to properly review the project over the course of the timeline, and determine if adding to the investment is the correct decision.

  1.  Maintaining an Appropriate Budget Plan

The very first rule of investing as a whole is,  “Do not spend above what you are willing to lose.”  There are no guarantees in the world of investing, and any money related activity can become quite addicting.  In order to counteract these feelings, be very calculated and committed to an investment strategy.  Even when an investor is overperforming in their portfolio, have the presence of mind to take a step back and make good decisions based on your initial strategy.  It is alright to decide to raise some of your target goals if the decision still fits in with your cost-risk analysis.  But be very careful, as the periods to follow can have the opposite results just as easily, and wipe out some of your past successes.

  1. Making Decisions Based on the Overall Outlook of the Market

In a bull market, the opportunities for growth are rampant.  This creates a risky situation in its own right, as an investor may be more inclined to overspend based on how well the market is performing in the recent moments.  But the tides can turn in an instant.  As discussed above, it is very important to remain committed to a solid strategy, keeping in mind to take profits along the way when presented with the opportunity.  At the time of writing this article, we are currently in a bear market, with many political and financial propositions hanging in the balance.  Understand that there is money to be made in a bear market, but also potential to keep tumbling.  Stay true to your goals, and overanalyze in these trying times when making financial decisions.

In conclusion, Dollar Cost Averaging when performed correctly can lead to highly successful outcomes.  Remember to always do your own research and establish investment plans with precision.  Take into account your cost of living, leaving room to be able to handle emergency situations as they arise.  Also, never make decisions to support stocks or cryptocurrencies based on emotion.  Take the proper precaution to accurately assess the risks against the rewards.  In doing so, you will make better decisions when managing your financial portfolio.

 News disclaimer:

‍Any views, thoughts, and opinions expressed by the author are solely those of the author and do not reflect  the views, opinions, policies, or position of the Meqa Network.  

James Petrovitz

Chief Marketing Officer

James provides customer service across all of our platforms, assists in marketing and development, and creates content with the writing team for our blog posts and the Meqa school.