DCA – Dollar-Cost Averaging is a very popular investment method among investors who want to reduce the risk due to high costs.
By the method of DCA – Dollar-Cost Averaging is the average cost. Investors must continuously invest in each period with the same amount of investment, regardless of the price of the investment asset at that time. This is considered to cut out emotions. Therefore, doing DCA will make us invest consistently, create discipline and create wealth for us in the long term.
Every working person or salaried person dreams of having money to spend comfortably in their retirement. But in reality, only a few people can make this dream come true.
It is a cruel truth that most people have a high chance of not having enough money to spend in retirement. This is because most people lack discipline and patience in saving money. Some say they do not have a lump sum for investment. Or they may lack knowledge about investment and do not have time to follow up. As a result, the money they have saved throughout their lives cannot create enough wealth or financial security for them in retirement.
If you want to start investing with discipline with a small amount of money and have a professional help to manage your investment, it would be investing in mutual funds using the dollar-cost averaging (DCA) method.
Dollar-Cost Averaging (DCA) refers to:
An investment where we gradually buy mutual funds in installments in equal amounts without having to pay attention to the price on the day of purchase.
Investing in mutual funds using DCA is like building investment discipline by buying regularly and consistently.
For example, the admin invests in equity mutual funds or bond funds or mixed funds (depending on the requirements and risks that each person can accept) in the same amount every month, which is 2,000 baht, by setting to buy this fund on the 25th of every month, regardless of the price of this fund. But it emphasizes that you must buy the same one regularly every month with the same amount of money and must do so continuously for a long period of time.
What are the advantages of investing in mutual funds using DCA?
Use a small investment each time. You can start with just a few hundred baht. Some funds can start investing with just 1 baht. And don’t worry about the price going up or down because in the end we will get the average cost price. Or don’t be afraid that you will forget to invest because if we use the method of automatically deducting money from the salary account to invest (for example, the admin invests every month on the day of salary payment, etc.)
This DCA investment method is a good way to build investment discipline because it allows us to invest consistently.
If we start investing early, we will have an advantage. The chance that we will have enough money to spend when we retire will not be difficult to achieve. But we must choose to invest in mutual funds that give high returns at a level of risk that we can accept. Because these mutual funds tend to invest in assets that are quite risky and have the opportunity to grow in the future.
In addition, DCA investment allows us to accumulate wealth little by little without having to invest a large sum of money at once.
“Although DCA may not be the way to get the best returns,”
But it is a way that allows us to build discipline and practice patience to accumulate wealth and can get satisfactory returns in the long run.
However, an important caution is that
- DCA is not suitable for all types of assets, such as commodities such as oil, because investing in this type of product requires monitoring and timing of investment (Market Timing).
- DCA should be a long-term investment. Those who plan to speculate in the short term are not suitable to do DCA because the purpose of DCA investment is designed to make us disciplined in investing.
Although DCA is a gradual and consistent investment, over time, various factors may affect the investment portfolio. Therefore, we should review our investment portfolio at least once a year to see if it still meets our investment needs.
“Investment has risks. Investors should study information carefully every time before making an investment decision.” But don’t forget that not investing is even riskier. Start investing with DCA for a comfortable retirement life.
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