For every newbie in the market, the process of investment demands some courage and strategy. To synchronize with the ups and downs of the market requires an insight and analyzation but Dollar-cost Averaging comes with a cooked up strategy to be followed by the newcomers mostly or whosoever wants to play it safe.
The ideology seeks attention through the investment of an average amount over a period of time.
This reduces the shock of loss and averages the profit if there is any. New investors seek opportunity and slight opening in the great wall of marketing from where they can enter without seeking much of a negative attention.
Dollar-cost Average fluctuates with the prices in the market, for the prices going up fewer shares are bought and vice- versa. An amount is fixed to purchase shares mirroring their current prices in the market. The investment is made regardless of what is happening in the market which allows a regular flow of investment in the market. The Dollar-cost Averaging is a saviour for who do not want put their heart in the risks involved with the swings of the market rather want to play it safe. However, the DCA technique does not come with any guarantee but it surely compensates on our loss. Take for example Investment through DCA is like buying a car with good quality airbags which won’t reduce any risks of accidents but it will protect you when one occurs by absorbing the shock. The investment charts available to investors varies from mutual funds to individual stocks depending upon intentions of an investor. The best advantage which tags along DCA is it does not break the news of you losing your assets overnight. To support your emotional front it balances and plans out according to the swings in the price of the market. It motivates you to buy more of the shares still keeping you safe from any sudden fluctuation of the industry. DCA has opened up a gate for hesitant investors hence benefitting the market runners. With less danger attached to the process, it has allowed many small budget investors to enter into the pool of investing.
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Keeping a tab on market takes time and a new investor may not have much of that patience. With several benefits of investment in terms of risks may get a front seat but at the same time, it may cause you to lose up to an opportunity to get hands on some big return.
Why is it beneficial for New investors
1: Safe to invest; does not demand much of scrutiny and lessens the risk.
2: Maintains the regularity; hence develops a portfolio with regular investments entries.
3: No issue of market timing.
4: Does not get affected by specific entry or period but takes the whole period into account, hence reducing the chances of loss.
Dollar Cost Averaging for New investors should be a thoughtful process and sincere amount of time should be given before jumping into any investment. Acknowledging the factor how safe it keeps the investing for us it should also be kept in mind that it may cost you lose upon some big shots.