What is dollar cost averaging ?

Dollar-Cost Averaging is an investment technique based on periodicity. Unlike a one-time investment which allows you to purchase stocks or securities all at once, DCA involves investing regularly. This means you invest your money at regular intervals, regardless of the market and its fluctuations.

The DCA allows you to invest a fixed amount, every week, every month or every quarter. It’s up to you to determine when the best time is. The market is rising ? You invest the same amount in a smaller number of stocks. Conversely, if the market is falling, you buy more shares. It is a smoothing method which aims to protect against stock market fluctuations.

However, call on a professional before getting started, to understand the risks of investing in the stock market. In addition, past performance does not in any way guarantee future performance, and the risk of loss of capital is always present.

Stock markets and the price of gold are subject to more or less significant fluctuations throughout the year. They respond to sensitive criteria (increase in the price of a barrel of oil, broken microprocessor, etc.), or to a feeling (fear of inflation, protection of capital, reorientation of savings).

In this context, Dollar-Cost Averaging acts as a protection, that is to say it limits exposure to the risk of market variations. In other words, if you invest just before a stock drops in value, you lose money. On the other hand, if you buy company shares regularly, the final value of your shares is smoothed.

The DCA is ideal for first-time investors, and people who wish to invest small amounts over the long term. You then build up savings over time, by reducing risks, as well as actions linked to emotions. In the event of a loss in the value of a share, you maintain your investment strategy, which will allow you to recover your investment.

Finally, this type of regular investment can quickly become a discipline. You invest, regardless of the market price, thanks to the advantages of smoothing and average gain.

Managing a stock or bond portfolio can be complex. So, the Dollar Cost Averaging solution can be tempting. However, there are several disadvantages to this type of passive investment.

Firstly, yield. You want to invest to save, realize a project, or pass it on to your family ? The profitability of DCA is not necessarily the best solution. Indeed, you are investing for the long term, and you may therefore miss an opportunity. A downturn in stocks is an opportunity to invest a larger sum, which will therefore have a greater effect in terms of profitability.

On the other hand, costs linked to investment cannot be excluded. Any purchase on the stock markets generates more or less significant costs. It is therefore necessary to take them into consideration, so as not to reduce your overall performance.

The keystone of Dollar Cost Averaging remains commitment. You have set up regular payments, but have you planned and anticipated your future expenses ? Can you continue these regular purchases in the long term ? These are all questions to ask yourself before making throw. Only a professional can then give you advice.

Commitment is both:

• The source of DCA performance;
• A blocking of your money for a specific period of time.

You have decided to take the plunge and embark on a DCA strategy ? You must then respect a few precautions:

• Choose the right title(s): if you make a mistake, you risk losing everything. Be sure to only take stocks or securities that can bring you added value;
• Determining a purchasing frequency: this is one of the keys to a successful DCA. Profitability, risks and smoothing are entirely dependent on this commitment. You will not be profitable with a monthly, weekly or quarterly payment. Determine your needs and your purchasing capacity in advance;
• Clearly state your goals: buying a house, retirement, travel, your children's education, purchasing gold, the panel is wide. Once the goal is determined, you can establish an investment schedule.

• You wish to buy physical gold (bullion, coins)? Gold Union offers you a wide choice of gold and silver products intended for investment. Our advisors are waiting for you at the agency to discuss your projects. Investing in gold protects you from inflation, and diversifies your savings!