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Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
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Worried about investing at market highs? Dollar-cost averaging can help
AutoInvest
Saxo
When markets are at all-time highs, some investors find themselves stuck on the sidelines, paralysed by the fear of buying at the top. But rather than trying to time the market, using dollar-cost averaging (DCA) can help you start investing – and keep investing, in any kind of market.
What is dollar-cost averaging (DCA)?
Dollar-cost averaging is an investment strategy where you divide the total amount you want to invest into smaller, regular contributions. So, instead of investing all at once, you invest a smaller fixed amount on a regular basis, giving you a balanced average cost.
How DCA works
Let’s take a hypothetical example, if you have $12,000 to invest in a stock or ETF. You could invest it all at one time, but you decide to invest $1000 every month for a year. Since you only buy whole shares, any leftover cash is carried over to the next month.
If you’d invested the full $12,000 at the start of the year when the price was $100, you would have bought 120 shares. But by using DCA, you’d buy more shares during market dips, ending up with 125 shares at a lower average price of $96.00.
Dare to be average
Dollar-cost averaging offers a systematic approach to investing – and that makes it easier to become a disciplined investor and stay on track to your long-term goals.
- No more emotional decision-making: By following a regular schedule of investments, you avoid the trap of chasing market highs or panic-selling the lows.
- Lowers the risk of investing at the top: With regular investments, there’s less chance you’ll put a large amount into the market right before a correction.
- Take advantage of market dips: Those market dips will be buying opportunities – you’ll buy more shares and lower your average buying price.
Get started using DCA with AutoInvest
Dollar-cost averaging is at the core of AutoInvest, Saxo’s hands-free monthly savings plan. With AutoInvest, it’s easy to start investing with recurring monthly ETF investments, without having to worry about timing the market or pick stocks. And with zero commissions to buy, no monthly fees and no minimum deposit, you’ll keep costs low.
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