In these uncertain times, the quest for financial growth and stability is on the minds of many. Fortunately, some strategies can help mitigate risks while building wealth. One such strategy is Dollar Cost Averaging (DCA). In this blog post, we will explore the concept of DCA and its application to assets like stocks, ETFs, and cryptocurrencies.
What is Dollar Cost Averaging (DCA)?
DCA is a smart investment approach that allows you to spread your investment over time rather than making a lump sum purchase. Instead of buying assets like stocks, ETFs, or crypto at a single price point, you break your investment into smaller, periodic units. For example, if you plan to invest 1 million Naira, you might buy 250,000 Naira assets weekly over a set period.
The Relevance of DCA
Understanding which assets to buy is one aspect of financial growth, but knowing how to purchase them to maximise profits is equally important. To illustrate the power of DCA, we conducted an in-house experiment.
Our In-House DCA Experiment
We initiated recurring purchases of two assets, Bitcoin and Ethereum, for 34 weeks. We invested in Bitcoin (around 23,000 Naira) and Ethereum (approximately 10,000 Naira) each week.
After our experiment, we achieved impressive results. We earned 263,513.91 Naira from Bitcoin and 598,133.70 Naira from Ethereum. The key takeaway here is that by breaking our budget into smaller units and making purchases at different points over 34 weeks, we were able to benefit from market fluctuations and capitalise on the rise and fall of cryptocurrency prices.
DCA in Action - "Recurring Buy"
We automated our DCA strategy using the recurring buy feature on the Busha app. This allowed us to specify the amount we wanted to invest at different times during the 34 weeks. Our purchases occurred at various price levels – high, low, and mid. Over time, the prices averaged out, resulting in the profits we achieved.
Watch the video below to discover our approach to the in-house dollar cost-averaging experiment.
Dollar Cost Averaging, or as we like to call it, "Recurring Buy," is a powerful strategy for anyone looking to navigate the world of cryptocurrency and other assets. It provides a structured approach to help you mitigate risks while steadily growing your wealth. If you need help starting your crypto journey, consider exploring recurring buy options as a solid foundation.